Australia’s central bank cut its official interest rate by a bigger-than-expected 1 percentage point yesterday to ease credit concerns amid global financial turmoil, cheering investors around the region.
The cut to 6 percent was the largest by the Reserve Bank of Australia (RBA) since May 1992. Analysts had expected the RBA to drop the rate by half a percentage point.
Australian stocks climbed into positive territory after opening sharply lower. Other Asian markets gained after the move as well.
PHOTO: AFP
RBA Governor Glenn Stevens said in a statement that the central bank had judged that a large cut in the cash rate was needed after studying the outlook for global growth and its likely effect on Australia.
“Conditions in international financial markets took a significant turn for the worse in September,” Stevens said. “Large-scale financial failures in several major countries were accompanied by serious dislocation in interbank markets and heightened instability in other markets, including sharp falls in share prices.”
He also referred to evidence of “a significant moderation in growth in Australia’s trading partners in Asia.”
Stevens said financing around the world would be difficult for “some time” and said that Australia was affected less than other countries “given the relative strength of the local banking system.”
The move follows a quarter-point reduction last month that was the first decrease in nearly seven years.
Investors responded to the move immediately, lifting Australia’s benchmark S&P/ASX-200 index nearly 2 percent to 4,628.9 in the hour after the announcement.
Australian Prime Minister Kevin Rudd said the decision would help maintain the stability of the financial system and see Australia through “tough times ahead.”
It was not immediately clear whether banks would pass on the rate cut to their customers.
Saul Eslake, chief economist with ANZ Banking Group Ltd, welcomed the cut as “extraordinary and bold.”
“They are clearly very concerned about the financial crisis and its potential impact on global growth, on Asian economies which they specifically mention and on commodity prices,” Eslake said. “I think it will be seen firstly as contributing to the health of the financial system and a big step to reducing the downside risks to economic growth, provided it isn’t interpreted as panic.”
The cut came even though inflation is at 4.5 percent, well above the RBA’s target range of between 2 percent and 3 percent.
INDONESIA
Separately, Indonesia’s central bank raised its benchmark interest rate 25 basis points to 9.50 percent yesterday, signaling its commitment to fight inflation at the risk of slower growth, officials said.
The move would also bolster the rupiah, which fell to 9,740 against the dollar in early trade yesterday, its lowest level since January 2006, before recouping some losses to 9,640 on suspected bank intervention.
Bank Indonesia Governor Boediono told Dow Jones Newswires he remained “alert but not worried” over the rupiah’s weakness.
Inflation soared to 12.14 percent year-on-year last month from 11.85 percent in August, driven by resilient domestic demand and higher global commodity and fuel prices.
JAPAN
Meanwhile, Japan’s central bank left its key interest rate unchanged yesterday amid heightened anxiety that the US credit crisis was quickly spreading from Wall Street to Europe and beyond.
In a widely expected decision, the Bank of Japan voted unanimously to maintain the uncollateralized overnight call rate at 0.5 percent for the 20th straight month, citing a “sluggish” economy along with high inflation rates.
“With regard to risk factors, strains in global financial markets have intensified in the wake of failures and rescues of US and European financial institutions and there are downside risks to the world economy,” the central bank said in a statement.
“In addition, weaker income generation reflecting earlier deterioration in the terms of trade could potentially weigh on domestic private demand,” the bank said.
Bank Governor Masaaki Shirakawa said yesterday that central banks should set monetary policy based on conditions in their own economies, playing down the chances of coordinated interest rate cuts.
Joint action may result in one country doing something that is not favorable for its own economy, he told a press conference.
“Each country will make its own decision considering its own conditions,” he said.
Finance chiefs from the G7 nations are scheduled to meet on Friday in Washington.
ROLLER-COASTER RIDE: More than five earthquakes ranging from magnitude 4.4 to 5.5 on the Richter scale shook eastern Taiwan in rapid succession yesterday afternoon Back-to-back weather fronts are forecast to hit Taiwan this week, resulting in rain across the nation in the coming days, the Central Weather Administration said yesterday, as it also warned residents in mountainous regions to be wary of landslides and rockfalls. As the first front approached, sporadic rainfall began in central and northern parts of Taiwan yesterday, the agency said, adding that rain is forecast to intensify in those regions today, while brief showers would also affect other parts of the nation. A second weather system is forecast to arrive on Thursday, bringing additional rain to the whole nation until Sunday, it
LANDSLIDES POSSIBLE: The agency advised the public to avoid visiting mountainous regions due to more expected aftershocks and rainfall from a series of weather fronts A series of earthquakes over the past few days were likely aftershocks of the April 3 earthquake in Hualien County, with further aftershocks to be expected for up to a year, the Central Weather Administration (CWA) said yesterday. Based on the nation’s experience after the quake on Sept. 21, 1999, more aftershocks are possible over the next six months to a year, the agency said. A total of 103 earthquakes of magnitude 4 on the local magnitude scale or higher hit Hualien County from 5:08pm on Monday to 10:27am yesterday, with 27 of them exceeding magnitude 5. They included two, of magnitude
CONDITIONAL: The PRC imposes secret requirements that the funding it provides cannot be spent in states with diplomatic relations with Taiwan, Emma Reilly said China has been bribing UN officials to obtain “special benefits” and to block funding from countries that have diplomatic ties with Taiwan, a former UN employee told the British House of Commons on Tuesday. At a House of Commons Foreign Affairs Committee hearing into “international relations within the multilateral system,” former Office of the UN High Commissioner for Human Rights (OHCHR) employee Emma Reilly said in a written statement that “Beijing paid bribes to the two successive Presidents of the [UN] General Assembly” during the two-year negotiation of the Sustainable Development Goals. Another way China exercises influence within the UN Secretariat is
Taiwan’s first drag queen to compete on the internationally acclaimed RuPaul’s Drag Race, Nymphia Wind (妮妃雅), was on Friday crowned the “Next Drag Superstar.” Dressed in a sparkling banana dress, Nymphia Wind swept onto the stage for the final, and stole the show. “Taiwan this is for you,” she said right after show host RuPaul announced her as the winner. “To those who feel like they don’t belong, just remember to live fearlessly and to live their truth,” she said on stage. One of the frontrunners for the past 15 episodes, the 28-year-old breezed through to the final after weeks of showcasing her unique