Reserve Bank of Australia Doubles Down, Cuts Rates by 1%

Daily Forex Fundamentals | Written by DailyFX | Oct 07 08 04:09 GMT |

The Reserve Bank of Australia shocked the markets, issuing a full 100 basis point interest rate cut, the largest since 1992, to bring borrowing costs to 6.00%. RBA Governor Glenn Stevens said the move owed to "a material change" in the risk to expectations for growth and inflation as international financial markets have taken a "significant turn for the worse". Stevens now sees the potential for output to decline faster than originally forecast as even creditworthy borrowers are unable to obtain required capital. Still, the Governor was careful to avoid setting a precedent, saying extraordinary circumstances required "an unusually large" reduction in the benchmark lending rate to relieve credit markets but that the RBA did not "regard that movement as establishing a pattern for future decisions."

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