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Australia Expects More Rate Cuts
World Economy

Australia Expects More Rate Cuts

Australian interest rates are predicted to fall further to new record lows this year, after the central bank slashed its forecasts for inflation, Nikkei reported. The Reserve Bank of Australia on May 3 surprised markets by cutting official interest rates to 1.75%, and economists predict it will make another cut in the months ahead. As other big economies have struggled to fight off very weak inflation, now Australia is battling a similar fate, and experts predict it will use monetary policy as a key tool. The RBA’s statement on Monetary Policy, published on May 6, days after rates were reduced, cut the forecast for the central banks’ preferred measure of inflation to 1% to 2% for 2016. That was a reduction of 1 percentage point from its previous forecast. It takes inflation well outside the RBA’s target range of 2% to 3%. The updated forecast followed the surprise news that the consumer price index dipped 0.2% in the January-March quarter and rose only 1.3% in the year to March, according to the Bureau of Statistics.

 

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