Australia cuts interest rates to record low

The Reserve Bank of Australia (RBA) has cut its key interest rate by 25 basis points to an all-time low of 2.25%.

The cut was the first from the central bank in 18 months and was widely expected by financial markets.

In reaction to the move, the benchmark S&P/ASX 200 hit a seven-year high, up 1.3%, while the Australian dollar slumped to a six-year low of $0.7650.

The RBA is the latest central bank to loosen monetary policy to boost growth amid falling oil and commodity prices.

It follows China, Canada, Singapore, Korea and India that have all cut interest rates in recent months.

Slowing economy

Australia is dealing with an economic slowdown, largely due to a drop off in mining investment, which had been a driver of the resource-rich economy.

“The available information suggests that growth is continuing at a below-trend pace, with domestic demand growth overall quite weak. As a result, the unemployment rate has gradually moved higher over the past year,” RBA Governor Glenn Stevens said in a statement on Tuesday.

In December, Australia’s economic growth for the third quarter came in well below expectations, while its unemployment rate hit a 12-year high of 6.3% in November.

Source: BBC News