The Reserve Bank of Australia (RBA) surprised analysts on Tuesday when it decided to slash its rates from 2 percent to 1.75 percent. RBA Governor Glenn Stevens cited low inflation and slowing global economic growth. Inflation contracted by 0.2 percent in the first quarter of the year.
The RBA expects its eased monetary policy to help reach the target inflation of 2 to 3 percent. The record-low bank rate will also put downward pressure to the Australian dollar which has been rising exponentially since the beginning of the year. Board governors have been expressing their worry over the overvalued AUD.
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