Melbourne, May 20 (AP) Australia's central bank on Tuesday reduced its benchmark interest rate by a quarter percentage for a second time this year, to 3.85 per cent after inflation fell within a target range.

The Reserve Bank of Australia reduced its cash rate from 4.1 per cent. The reduction from 4.35 per cent at its February board meeting was Australia's first rate cut since October 2020.

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The rate cut was anticipated, although expectations had declined slightly after the United States and China agreed last week to cut back recent tariff hikes for 90 days, reviving stalled trade between the world two biggest economies.

The bank adjusts interest rates to steer inflation toward a target band of between 2 per cent and 3 per cent.

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During the March quarter, annual inflation was 2.4 per cent. The trimmed mean –- a gauge of underlying inflation which is the bank's preferred measure –- was 2.9 per cent.

Inflation was also steady at 2.4 per cent in the previous three months. But the underlying figure, which strips out the smallest and largest values, was 3.2 per cent in the last quarter of 2024.

Inflation has gradually declined after it peaked at 7.8 per cent in the last quarter of 2022.

Unemployment inched up to 4.1 per cent in January-March from 4.0 per cent in the December quarter but remains relatively low. Economists fear a shortage of workers could fuel further inflation. (AP)

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