SYDNEY, 3rd May, 2016 (WAM) – The Reserve Bank of Australia on Tuesday cut the cash rate to a record low of 1.75 per cent in a bid to head off falling prices and an economic downturn.

The cash rate is now easily at its lowest level under the current system of monetary policy setting.

The cut, the first in a year, came less than a week after a shock drop in core inflation to well below the central bank’s 2 per cent to 3 per cent target band, according to Sydney Morning Herald?.

The latest cut puts Australia into the club of developed economies with ever-falling interest rates and bond yields. Japan, the European Union and parts of Scandinavia now have zero or even negative nominal rates. New Zealand, too, looks likely to keeping cutting from an already-low 2.25 per cent official cash rate.

RBA governor Glenn Stevens said the decision was based on last week’s surprisingly weak inflation read-out.

“Inflation has been quite low for some time and recent data were unexpectedly low,” he said in a statement.