Australia's Central Bank Cuts Interest Rate to 2.0 Percent

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Australia's central bank cut its benchmark interest rate to a record low of 2.0 percent on Tuesday in a bid to reinvigorate the struggling economy as a long, China-fuelled mining boom fizzles out.

"At today's meeting, the board judged that the inflation outlook provided the opportunity for monetary policy to be eased further, so as to reinforce recent encouraging trends in household demand," Reserve Bank of Australia governor Glenn Stevens said in a statement.

The cut was forecast by most economists.

Annual core inflation was 0.6 percent in the three months to March to take the year-on-year rate to 2.35 percent, which is within the RBA's two to three percent inflation target band.

The Australian economy has endured a bumpy ride as it exits from an unprecedented mining investment boom that has helped the nation avoid a recession for more than two decades.

But non-resources sectors have struggled to fill the gap left by mining, with the unemployment rate remaining at elevated levels over the past year.

The jobless rate slipped to 6.1 percent in March, but had been gradually rising over the past year. It peaked at 6.3 percent in January -- a more than 11-year high.

Stevens said the Australian dollar, which has lost ground amid plunging commodity prices, needed to fall further.

"Further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices," he said.

The local unit eased to 77.88 U.S. cents immediately after the decision but jumped back to over 79 U.S. cents. 

Analysts said the sharp rise reflected the market's disappointment that the central bank did not include an easing bias in its statement, which could have pointed to further rate cuts.

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