RBA could be set for stint on the sidelines after cutting rates again

The RBA has cut official interest rates by 25 basis points to a new record low of 2 per cent. 

Federal Treasurer Joe Hockey has said he hopes the cut will ‘fertilise the green shoots’ of the economy. 

If banks pass on the rate cut in full, as the ANZ has already indeed done, it will again mean around $50 per month off mortgage repayments on a $300,000 home. 

The rate cut should see the lowest-rate discount variable home loan to drop below 4 per cent for the first time ever, and plenty of economists think it could be the last rate cut by the RBA for 2015. 

RBA Governor Glenn Stevens indicated in his statement that it could be start of a spell on the sidelines for the Reserve Bank. 

“At today’s meeting, the board judged that the inflation outlook provided the opportunity for monetary policy to be eased further, so as to reinforce recent encouraging trends in household demand,” he said. 

The omission of the statement from last month saying that further easing of policy may be appropriate in the period ahead seemed to indicate that they will be reluctant to cut rates again in the near term and they may now seek a position of neutrality. 

Federal Treasurer Joe Hockey called the rate cut ‘good news’ and urged Australians to capitalise on the low rates and borrow more money. 

“Whether you be a household or a small business, now is the time to have a go, to borrow some money and to invest, invest in the things that help to create jobs,” Mr Hockey said.


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