June rates cut by 25 basis points
(6 June 2012 – Australia) The Reserve Bank of Australia (RBA) cut its official cash rate by 25 basis points, down from 3.75 percent to 3.5 percent, the lowest level since November 2009.
In the accompanying statement, RBA governor Glenn Stevens said 'financial market sentiment has deteriorated over the past month'.
'At today's meeting, the Board judged that, with modest domestic growth and a weaker and more uncertain international environment, the outlook for inflation afforded scope for a more accommodative stance of monetary policy,' he said.
The onus will now fall on commercial lenders to pass the reduction on to borrowers. Bank of Queensland (BoQ) was first to move, cutting 20 basis points from its standard variable rate, effective June 16, taking it down to 6.91 percent.
A 25 basis point cut, if passed along in full by a bank, reduces payments on an average A$300,000 mortgage by A$48 a month.
Many economists had predicted the RBA would repeat May’s surprise 50 basis-point reduction.
'There were three possible outcomes: zero, 25-basis-point-cut, or 50, and they've gone for something in the middle,'' said Michael Blythe, chief economist at the Commonwealth Bank, told The Herald.
'It suggests they're a little less worried about the outlook than the extreme pessimism that was building in markets,' he said.
Treasurer Wayne Swan described the RBA's decision as ''a win for household and it's a dividend of returning our budget to surplus.'
'The announcement today from the Reserve Bank gives Australians confidence that the RBA has further room to move, and of course a big part of that flexibility is from the return to surplus,' he said.
'At today's meeting, the Board judged that, with modest domestic growth and a weaker and more uncertain international environment, the outlook for inflation afforded scope for a more accommodative stance of monetary policy,' he said.
The onus will now fall on commercial lenders to pass the reduction on to borrowers. Bank of Queensland (BoQ) was first to move, cutting 20 basis points from its standard variable rate, effective June 16, taking it down to 6.91 percent.
A 25 basis point cut, if passed along in full by a bank, reduces payments on an average A$300,000 mortgage by A$48 a month.
Many economists had predicted the RBA would repeat May’s surprise 50 basis-point reduction.
'There were three possible outcomes: zero, 25-basis-point-cut, or 50, and they've gone for something in the middle,'' said Michael Blythe, chief economist at the Commonwealth Bank, told The Herald.
'It suggests they're a little less worried about the outlook than the extreme pessimism that was building in markets,' he said.
Treasurer Wayne Swan described the RBA's decision as ''a win for household and it's a dividend of returning our budget to surplus.'
'The announcement today from the Reserve Bank gives Australians confidence that the RBA has further room to move, and of course a big part of that flexibility is from the return to surplus,' he said.
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