RBA Update: Interest Rate Reduction

Posted on October 2nd, 2012 · Posted in News

At its meeting today, the Reserve Bank decided to lower the cash rate by 25 basis points to 3.25 per cent, effective 3 October 2012.

The outlook for growth in the world economy has softened over recent months, with estimates for global GDP being edged down, and risks to the outlook still seen to be on the downside. Economic activity in Europe is contracting, while growth in the United States remains modest. Key commodity prices for Australia remain significantly lower than earlier in the year, even though some have regained some ground in recent weeks.

At today’s meeting, the RBA judged that, on the back of international developments, the growth outlook for next year looked a little weaker, while inflation was expected to be consistent with the target. The Board therefore decided that it was appropriate for the stance of monetary policy to be a little more accommodative.

Whether or not the lenders pass on the full rate cut remains to be seen.