RBA: December Rate Cut

05/12/2012 Level One

At its meeting today the Reserve Bank of Australia (RBA) decided to cut the cash rate by 0.25%. This brings the cash rate to 3.00% – the lowest the cash rate has ever been and on par with the GFC rate back in April 2009.

The RBA’s decision rides on the back of modest economic growth and a decline in commodity prices. Governor Glenn Steven’s stated that “the board judged at today’s meeting that a further easing in the stance of monetary policy was appropriate now”.

“This will help to foster sustainable growth in demand and inflation outcomes consistent with the target over time”.

The majority of economists were not surprised by the rate reduction.

Now all eyes are on the banks to see if they will pass on at least some of the cut.

Despite the reduction today, Australia’s rates are still some of the highest in the developed world. The USA and the UK have rates nearly at zero and subsequently have resorted to emergency steps to stimulate their economy such as buying large sums of government debt.

More rate cuts are tipped but its anyone’s guess. We will keep you updated.


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