Finance Matters

Posts Tagged ‘cut’

The Reserve Bank of Australia (RBA) has today elected to cut interest rates by one quarter of a percentage point to 4.5% in a bid to bolster growth.

The move, which was widely expected, comes as the global economy slows and unemployment rises (currently at 5.2%).

It was the first time in two-and-a-half years that the RBA has cut rates.

The Australian economy, dubbed the “wonder from down under” was one of the few not to have fallen into recession like its counterparts throughout the world as it has benefited from an increase in commodity prices, while exports have received a boost due to demand from China for its iron ore and other raw materials.

However, flood and cyclone disasters, which hit earlier this year, led to a fall in coal and agricultural exports and resulted in the economy contracting in the first quarter – the largest contraction since 1991.

Furthermore, other areas of the economy, in particular retail sales, have suffered a sharp slowdown over recent months,

Meanwhile, in a statement today, the RBA said: “Information about the Australian economy suggests moderate growth overall.”

The bank added: “In other sectors, cautious behaviour by households and the high exchange rate have had a noticeable dampening effect.”

However, the high exchange rate has meant inflation has remained under control – unlike many other economies, particularly in Asia, which are suffering from stubbornly high inflation.

The RBA expects inflation to stay within its target range of 2% – 3% in 2012 and 2013.

The central bank warned that the euro zone’s sovereign debt crisis may continue to affect Australian businesses and households, despite the rescue plan agreed by European leaders last week.

The Reserve Bank of India (RBI) has today raised key interest rates for the thirteenth time since March 2010, in a bid to tame stubbornly high inflation.

The central bank lifted its main rate to 8.5% from 8.25% as inflation soars on the back of higher food and fuel prices and the measures were widely expected.

Figures recently revealed India’s wholesale price inflation rose to 9.72% last month on an annual basis – significantly above the central bank’s target of between 4% and 5%.

This represented the tenth consecutive month that inflation has been above the 9% mark.

Inflation reached a two-year high earlier this year of 10.16%, after food, fuel prices and manufactured goods surged – the highest among the Group of 20 leading nations.

Annual food inflation has surged, causing major problems for the 450 million people who live below the poverty line in the country.

However, economists say that the RBI has a difficult task to bring inflation down amid signs of slowing growth.

Prime Minister Manmohan Singh has previously said inflation is a “serious threat” to the country’s growth.

It is currently the world’s second fastest-growing major economy, behind China. However, the central bank has slashed its growth forecast from 8% to 7.6% for the fiscal year that ends next March.

In a statement, the RBI said: “Slower global growth will have an adverse impact on domestic growth, particularly on industrial production, given the rising inter-linkages of the Indian economy with the global economy.”

In the meantime, the RBI warned that inflation will remain high in the short-term.

“Inflation is broad-based and above the comfort level of the Reserve Bank. Further, these levels are expected to persist for two more months,” the bank added.

Inflationary pressures are rife throughout the world, particularly in Asia, and many central banks are hiking interest rates in order to tame inflation.

Brazil’s central bank has cut the country’s key interest rate to 12% from 12.5% – a move which surprised economists. However, the bank said there had been a “substantial deterioration” in the outlook for the global economy and that was its reason for the rate cut. One analyst said the rate cut is a “huge [...]

Moody’s has lowered the government debt rating of Japan to Aa3 with a stable outlook, from Aa2. The credit rating agency has also taken action on the ratings of most Japanese banks, including Bank of Tokyo-Mitsubishi and Sumitomo Mitsui Banking Corporation, with the average downgrade one notch. According to Moody’s, the sovereign downgrade has been [...]