The Reserve Bank of Australia (RBA) has announced its decision to lower the official cash rate by 25 basis points, bringing the rate to 4.5 per cent.


RBA Chairman Glenn Stevens cited positive figures released by the US, coupled with a successful artificial slowdown of China’s growth as the main reasons behind the decision.


Mr Stevens also announced the return to form of output from Asia following the Japanese earthquake and growing domestic demand as factors in the RBA’s decision.


“CPI inflation on a year-ended basis remains above the target, due to the effects of weather events last summer, but is now starting to decline as production of key crops recovers. Moreover, with labour market conditions now softer, the likelihood of a significant acceleration in labour costs outside the resources and related sectors in the near term has lessened,” Mr Stevens said.


Mr Stevens expressed his confidence that CPI was likely to remain within the target 2-3 per cent band, implying that any further rate changes are unlikely.


“With overall growth moderate, inflation now likely to be close to target and confidence subdued outside the resources sector, the Board concluded that a more neutral stance of monetary policy would now be consistent with achieving sustainable growth and 2–3 per cent inflation over time,” Mr Stevens sia.d


Mr Steven’s full statement can be found here