The Reserve Bank of Australia (RBA) is worried about a slowdown in the world economy, which means more rate cuts are coming, economists say.

The central bank slashed interest rates by 75 basis points this month, taking the cash rate to a three and a half year low of 5.25 per cent.

The minutes of that November 4 board meeting have revealed on Tuesday that policymakers were concerned about how global financial problems would affect the Australian economy.

“Key factors in members’ consideration of the policy decision were the continuing poor conditions in financial markets, the significant deterioration in the outlook for the world economy, with implications for Australia, and the likelihood that inflation in Australia would fall over the year ahead,” the minutes said.

Commonwealth Bank of Australia senior economist John Peters said the RBA was particularly worried about how a slowing US economy would hurt Australia.

“They’re concerned about the growth outlook and they’re really trying to ensure the economy doesn’t follow the Anglo economies into recession,” he said.

Mr Peters said the RBA was likely to cut rates by 50 basis points in December, and keep cutting the cash rate until it fell to four per cent.

The RBA contemplated a smaller rate cut of 50 basis points but the risks of weakening demand prompted the board to lower its target for the cash rate by 75 basis points, the minutes said.

Following the Melbourne Cup day meeting, interest rates were lowered to 5.25 per cent.

The cash rate was last at this level between December 2003 and March 2005.

Since the board met on November 4, there has been more gloomy economic news, with more developed countries announcing their economies had fallen into recession.

The 15-member eurozone went into recession, while Australia’s largest export market, Japan, announced on Monday it had two consecutive quarters of economic contraction.

JPMorgan chief economist Stephen Walters said the minutes confirmed the RBA wanted to return interest rates to a neutral policy as quickly as possible, whilst keeping inflation in check.

“Having done so in three assertive hoops, our view is that officials now probably will move at a more measured pace, with one wary eye on the outlook for inflation,” he said.

The RBA cut interest rates in September for the first time in seven years.

A month later, interest rates were slashed by 100 basis points - the biggest cut since 1992 - to be followed by November’s 75 basis point easing.

The RBA’s quarterly monetary policy statement said last week it did not expect inflation to fall back to the two to three per cent target until late 2010.

Headline inflation is running at five per cent.

Westpac senior economist Andrew Hanlan said the minutes showed the RBA was becoming more confident that inflation would fall and its focus was on keeping the economy growing.

“Those themes come through in the minutes much more clearly,” Mr Hanlan said.

“They’ve downgraded their growth forecasts and they still see downside risks to those lower growth forecasts.

“It all suggests that inflation will be tamed in time.”

Mr Hanlan said the deterioration in global conditions has moved quicker than anticipated and required a rapid, aggressive response.

“That’s why it’s no longer appropriate just to move in small steps and why the Reserve Bank has recognised the need for much larger reductions in rates,” Mr Hanlan said.

“Global events have moved very quickly and so it’s necessary for the RBA to promptly move monetary policy to at least a neutral setting, which is what they refer to here in the minutes.”

Westpac has forecast that the cash rate would reach 3.50 per cent next year.

The minutes said “lower official interest rates cuts had been fully passed on to housing loan rates, but significantly less so to business lending rates, in particular small business rates”.