Australia lowers policy rate to 2-year low of 3.85%

By Mucahithan Avcioglu

ISTANBUL (AA) - The Reserve Bank of Australia (RBA) cut its policy rate by 25 basis points to 3.85% on Tuesday, the lowest level in two years, citing the global outlook and falling inflation at home.

The decision also matched the market expectations.

The central bank said in a statement that upside risks to inflation have diminished, while international developments are expected to put pressure on the country's economy.

"Inflation is in the target band and upside risks appear to have diminished as international developments are expected to weigh on the economy," the statement said.

It warned of ongoing shocks in the global economy due to the US President Donald Trump administration's trade policies and the deteriorating geopolitical environment.

The central forecasts are subject to considerable uncertainty due to the rapid change in world trade policy.

"Setting aside overseas developments, private domestic demand appears to have been recovering, real household incomes have picked up and there has been an easing in some measures of financial stress," it added.

After the decision, the Australian dollar lost around 0.56% of its value against the US dollar as of 0720GMT, trading around 1.5572.