Australian central bank cuts interest rates

Australia’s central bank has made a bold and clear move as they have cut the benchmark interest rate by one percentage point, which is twice the forecast rate cut.

The interest rate cut represents the highest since a recession in 1992, although it has caused a rebound in Asian stocks and increased speculation that other countries in the region will follow suit.

Australian shares closed up 1.7 percent today as they had fallen by more than 3.0 percent at the beginning of the day.

A statement released form the central bank indicated that the move was also in response to the reduction in growth of the country’s trading partners in Asia.

Inflation was also a high concern in September 2008, inflation is around 5 percent which is well above the 2-3 percent ceiling rate.

Australian mortgage holders had been affected by the prior increases and there were repeated fears that the country was staring a similar type of mortgage foreclosure rate that has crippled the US and stirred the world economy into recession.

Reserve Bank Governor, Glenn Stevens, said that it is an unusually large movement in the cash rate but it was needed in order to significantly reduce costs to borrowers.

The government has also welcomed the decision by the bank, as it will lighten the load and economic strain on hard-working, honest Australian families.

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