Australia's central bank cut its main cash rate today for the first time since the global financial crisis more than two years ago, responding to benign inflation at home and threats to the global economy from Europe's debt emergency.
The Australian dollar slipped and rate futures priced in further easing after the Reserve Bank of Australia (RBA) cut by 25 basis points to 4.5 per cent.
The RBA said inflation was now likely to be more consistent with its long-term target in both 2012 and 2013.
"The board concluded that a more neutral stance of monetary policy would now be consistent with achieving sustainable growth and 2-3 per cent inflation over time," RBA governor Glenn Stevens said in a statement.
The bank last cut rates in April 2009 when it was easing aggressively in response to the global financial crisis.
Economists, however, doubted this was the start of an easing campaign given Australia's mining sector was still booming.
"They've recognised that inflation is lower and they're a little bit more cautious on the global outlook," said Paul Brennan, head of market economics at Citi.
"It all says it is sensible to bring back policy from restrictive to neutral and they'll keep it on neutral now for an extended period," he added.
"Unless there's some big surprises over the next couple of months, I think rates are on hold for quite a while."