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AUSTRALIA'S CENTRAL BANK CUTS RATES TO HISTORIC LOW

Wednesday May 20th, 2015

The Reserve Bank of Australia (RBA) has cut its key interest rate by 25 basis points to an all-time low of 2%.

Rising property prices in Australia's biggest city, Sydney, a strong currency and a drop in iron ore prices are among the reasons for the cut.

The cut is the second this year, following a previous 25 basis point cut in February.

The RBA's move follows similar action from central banks in China, Canada, Singapore, Korea and India.

A rising Australian dollar had also been cause for concern. The currency started to fall against the US dollar on the RBA's announcement.

"The RBA has done the right thing," said economist Shane Oliver from AMP Capital.

"Sure, surging Sydney house prices are a concern but interest rates need to be set for the national 'average', not just one city," he said.

Australia's central bank had been under pressure to cut its lending rates further this year, particularly amid worrying iron ore prices - which recently fell to decade lows - together with a recent strengthening of the local currency.

Analysts said the RBA's move to cut its lending rates would help further lower the Australian dollar, which would in turn help commodity producers exporting products priced in US dollars.

Source: BBC

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