Australia's Reserve Bank Cuts Rates To Historic Low Of 2.5%

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Australia’s Reserve Bank has cut the target cash rate by 25 basis points to 2.5%, the lowest level in 50 years.

Critically, the reserve sees inflation as on target and expects it to stay on track in the medium-term:

Recent data confirm that inflation has been consistent with the medium-term target. With growth in labour costs moderating, this is expected to remain the case over the next one to two years, even with the effects of the recent depreciation of the exchange rate.

This has been read as a signal that the rate-cutting phase may be coming to an end and the Aussie dollar has risen slightly on the news.

Here’s the chart, via @CommSec, of today’s AUD against the greenback, with the spike on the decision:


Here’s what the RBA said on the strength of the currency:

The Australian dollar has depreciated by around 15 per cent since early April, although it remains at a high level. It is possible that the exchange rate will depreciate further over time, which would help to foster a rebalancing of growth in the economy.

The full statement’s here.

NAB immediately announced a cut of 25 basis points in its variable home loan rate to 5.88%, which it says will save more than $60 on the average loan. The RBA will be hoping customers spend it.

CBA also passed on the full rate cut, while Westpac cut rates by 28 basis points.

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