Interest rates cut by 0.25% for Australian mortgages

The Reserve Bank has taken the official cash interest rates in Australia to a record low of 1.5% after cutting rates by 0.25% on 2nd August.

Why did the Reserve Bank decide to cut rates again?

Reasons cited in their monetary policy press release on Tuesday include slow economic growth globally, mixed employment numbers, a reduced risk that lower interest rates could stimulate the housing market today, and an opportunity to help economic growth move along in the context of a low inflationary environment.

They also noted that a lower exchange rate would continue to help Australia’s terms of trade (increased exports) which had deteriorated over recent years (lower Chinese growth and lower commodity prices).

The mix of economic data did not seem as compelling to favour a rate cut, and considering their existing low level (despite not being passed on by banks to borrowers) however it indicates Reserve bank board members being more keen to avoid deflation and attempt to stimulate some prices growth towards the long term target inflation of between 2 and 3%. Inflation appears to be running at around 1% today.

Australia’s major banks are passing on a cut between 0.1 and 0.14% to their existing and new variable-rate mortgage customers.

from: Daniel, at Aussiefpgroup



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