By FXEmpire.com

One can never predict what Glenn Steven’s is going to do, he is almost as confusing as his partner in the US, Fed Chairman Bernanke.

They seem to never cater to politics and have their own interpretation of the economy and their own long term picture and guide.

Once again the RBA surprised the markets. It was already a given that there would be rate reduction of .25bps. The markets had factored that in, but no one would have been surprised if the RBA decided to hold. But they went for the kill. Sixteen economists surveyed last week expected the RBA to cut the cash rate at its May 1 board meeting. Almost all agreed a 1/4 pt cut was likely.

The statement issued today said:

The Reserve Bank of Australia (RBA) has cut the official cash rate by 50 basis points to 3.75 per cent.

In a statement accompanying the decision, RBA governor Glenn Stevens said growth in the world economy slowed in the second half of 2011, and is likely to continue at a below-trend pace this year.

“A deep downturn is not occurring at this stage, however, and in fact some forecasters have recently revised upwards their global growth outlook,” Mr Stevens said.

“Conditions in Europe remain very difficult, while the United States continues to grow at a moderate pace.

“Commodity prices have been little changed, at levels below recent peaks but which are nonetheless still quite high.

“Australia’s terms of trade similarly peaked about six months ago, though they too remain high.”

Mr Stevens said financial market sentiment had improved this year and that capital market is supplying funding to corporations and well-rated banks.

“At the margin, wholesale funding costs have declined over recent months, though they remain higher, relative to benchmark rates, than in mid 2011,” he said.

“Market sentiment remains skittish, however, and the tasks of putting European banks and sovereigns onto a sound footing for the longer term, and of improving Europe’s growth prospects, remain large.

“Hence Europe will remain a potential source of adverse shocks for some time yet.”

The Aussie dropped in immediate trade, but markets and traders hailed the decision.

Click here a current AUD/USD Chart.

Originally posted here