RBA Cuts Rates - 5.6.2012

The Board of the Reserve Bank of Australia decided at its policy meeting today to lower the cash rate target by 0.25% to 3.5%. Analyzing international economic conditions the central bank noted “further weakening in Europe” and some “further moderation in growth in China”. Although capital markets remain open to high-reliable borrowers, spreads have increased, the bank concluded. As for the domestic economy, inflation is expected to stay in the range of 2%-3% over the coming two years. As a result of lower commodity prices, heightened risk aversion and expectations of lower interest rates, the exchange rate of the Australian dollar has declined over the recent weeks. Last Friday the aussie fell to its lowest level since October 2011 against the greenback, touching 0.9580. The central bank’s interest rate cut has been widely expected by market participants, leaving today the pair above 0.9700.