Australia's central bank cut its benchmark cash rate by 25 basis points to 2.0 percent, as expected by financial markets, saying the outlook for inflation "provided the opportunity for monetary policy to be eased further, so as to reinforce recent encouraging trends in household demand."
The Reserve Bank of Australia (RBA) has now cut rates twice this year for a total cut of 50 basis points but omitted issuing a guidance about its future intentions, signaling a neutral policy stance.
At its last meeting in March, when the RBA maintained its cash rate, it said that further easing may be appropriate to foster sustainable growth in demand and inflation.
On Friday the RBA will issue its latest monetary policy statement and tends to change rates when forecasts are changed, a sign that it is likely to again cut its inflation forecast for the current year to June from 1.25 percent, a forecast that was trimmed in February from a previous 1.5-2.5 percent.
In the first quarter of this year Australia's consumer price inflation rate dropped to 1.3 percent from 1.7 percent in the fourth quarter of 2014, well below the RBA's 2-3 percent target.
As in recent months, RBA Governor Glenn Stevens Glenn Stevens called for a further depreciation of the Australian dollar, saying "further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices."
The Australian dollar, known as the aussie, has been falling against the U.S. dollar since September 2014 though it has rebounded since mid-April after hitting around 1.32 to the U.S. dollar. Today it strengthened slightly to be trading at 1.26 from 1.27, down 3.2 percent for the year, with traders probably given the currency a lift on expectations that the RBA will hold off on further rate cuts due to the lack of policy guidance.
The RBA said latest data suggested "improved trends in household demand" and stronger growth in employment though weak investment in both mining and non-mining sectors will remain a drag on private demand and subdued public spending.
Stevens acknowledged that house prices have continued to rise strongly in Sydney - last month he described Sydney house prices as "rather exuberant" - but added that price trends were more varied in other cities and the RBA was working with other regulars to "assess and contain risks that may arise from the housing market."
The Reserve Bank of Australia issued the following statement by its governor, Glenn Stevens: