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The Reserve Bank of Australia (RBA) lowers its interest rate to 1.75% from 2.00% on Tuesday. This decision was not expected by analysts.
The RBA Governor Glenn Stevens said that the interest rate cut was needed to reach a sustainable growth in the economy and to boost inflation.
He pointed out that the reason for the interest rate cut was a larger-than-expected drop in inflationary pressures.
The RBA governor also said that the Australian economy continued to rebalance after the mining investment boom, adding that the economic growth was expected to expand at a more moderate pace, while labour market indicators were more mixed.
Stevens also said that inflation was expected to be lower than previously estimated.
He noted that a stronger Australian dollar could complicate the adjustment of the economy in Australia.
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