Inflation presses Australian reserve bank to cut rate further

Special Report:Global Financial Crisis

CANBERRA, Jan. 28 (Chinese media) -- Another substantial interest rate could be cut by the Reserve Bank of Australia (RBA) as rapidly moderating inflation pressures mounted recently, according to Australian Bureau of Statistics data released on Wednesday.

The Reserve Bank of Australia is to hold its first board meeting of this year next Tuesday, and economists expected the bank to further cut the interest rate.

The RBA cut the cash rate by 300 basis points over the last four months of 2008 in an attempt to stave off an ever threatening recession.

The consumer price index (CPI) fell for the first time in two years during the December quarter because of lower prices for petrol, cars, health products and financial services.

The consumer price index fell 0.3 per cent in the December quarter, the biggest drop since September 1997, Australian Bureau of Statistics data showed.

"Inflation is expected to continue to ease over the next six to12 months, as the full effect of weaker world economic conditions flows through," Australian Treasurer Wayne Swan told reporters in Canberra on Wednesday.

The annual inflation rate fell to 3.7 percent from 5.0 percent in the 12 months to September, dragging it back towards the RBA's two to three percent target band.

Underlying inflation also moderated, which Swan suggested showed inflation pressures were easing more broadly.

"Inflation is definitely moderating, it is not the economic challenge in the short term. Supporting growth and jobs is," Swan said.