(8 May 2013 – Australia) The Reserve Bank of Australia (RBA) has unexpectedly cut the interest rate by 25 basis points to a historic low of 2.75 percent.
National Australia Bank (NAB) is the first of the big four banks to follow, by passing on the whole 25 basis points, cutting its standard variable home loan rate to 6.13 percent.
The Bank of Queensland also lowered its rates by 25 basis points to 6.26 percent.
Commonwealth Bank of Australia, Westpac and Suncorp all reduced their mortgage rates by 0.25 percentage points on Tuesday, hours after the announcement.
ANZ will make its decision at its regular interest rate review on Friday.
'The Board has previously noted that the inflation outlook would afford scope to ease further, should that be necessary to support demand,' RBA governor Glenn Stevens said in a statement.
'At today's meeting the Board decided to use some of that scope. It judged that a further decline in the cash rate was appropriate to encourage sustainable growth in the economy, consistent with achieving the inflation target.'
Stevens added that while an easing in interest rates has flowed through to the economy, the Australian dollar remained at a 'historically high level over the past 18 months'.
'Moreover, the demand for credit remains, at this point, relatively subdued,' he said.
Financial markets were pricing in a 50 percent chance of a 25 basis points reduction for May, and tipping at least 50 basis points of cuts by the end of the year.