Sydney - The Reserve Bank of Australia (RBA) on Tuesday cut interest rates by 0.75 per cent to 5.25 per cent in response to a raft of figures showing the economy slowing in the wake of the global financial crisis.

It was the RBA's third monthly cut in the rate it charges banks for borrowing, a reversal of a trend that had seen 12 consecutive rises in the cash rate since May 2002.

The further easing of monetary policy came despite inflation being above the RBA's 3-per-cent target. The central bank now sees a recession as more of a threat than inflation.

"Capacity pressures are now easing and, given the outlook for more moderate growth in demand and activity, it is reasonable to expect that inflation in Australia will soon start to fall," RBA governor Glen Stevens said.

The central bank has now cut the cash rate by 1.75 per cent in three consecutive months. (dpa)