In the minutes of its Tuesday meeting, the Reserve Bank of Australia provided explanations of an abrupt interest rate cut. The reasons included inflation hovering below forecast, a sluggish economy and higher mortgage rates.


The central bank of Australia decided to lower the benchmark rate by 50 basis points to 3.75% from 4.25%. This is the most drastic rate reduction since the world financial crisis broke out.


As the meeting minutes suggest, the RBA board considers the national economy growing at a slower pace that it had been foreseen.


Moreover, the data on inflation is indicative of moderate prices in the closest future. It should be reminded that in the 1st quarter inflation was below the expectations.


Underlying inflation is in the lower part of the target band - at 3-4% � and the RBA expects it to stay there. The regulator representatives also said that the global economic uncertainty also contributed to the rate reduction.