First RBA rate drop in 7 years
(3 September 2008 – Australia) The Reserve Bank of Australia (RBA) has announced the first interest rate cut in the past seven years at its September board meeting.
After 12 consecutive interest rate rises of 25 basis points since 2002, the Board decided to lower the cash rate by 25 basis points to 7.0 percent, effective 3 September, 2008.
The major banks have followed suit, with the Big Four of ANZ, CBA, NAB and Westpac all dropping their variable rate home loan interest rates by 0.25 percent pa.
St George, having waited for the announcement of the move by each of the Big Four, trumped them all by reducing their standard variable home loan rate by 30 basis points.
While the extra cut by St George helps it move in line with competitors, the effective date of the rate cut will not be until next month, in order to help reduce its own funding costs.
Glenn Stevens, governor of the RBA said in the official statement that the board has been looking to restrain demand in an economy which has been experiencing high inflation over the past year.
He added that the evidence is that the tight financial conditions, in conjunction with other factors including higher fuel costs and lower asset values, have exerted the needed restraint on demand.
It is looking more likely that household demand will remain subdued and overall economic growth slow over the period ahead. Inflation is likely to remain relatively high in the short term, with the CPI affected by the high global oil prices in mid year and other increases in raw materials prices, Stevens said.
But looking further ahead, the outlook for demand suggests that inflation in both CPI and underlying terms is likely to decline over time, provided wages growth remains contained. The Bank’s forecast remains that inflation will fall below 3 per cent during 2010, Stevens concluded.
The major banks have followed suit, with the Big Four of ANZ, CBA, NAB and Westpac all dropping their variable rate home loan interest rates by 0.25 percent pa.
St George, having waited for the announcement of the move by each of the Big Four, trumped them all by reducing their standard variable home loan rate by 30 basis points.
While the extra cut by St George helps it move in line with competitors, the effective date of the rate cut will not be until next month, in order to help reduce its own funding costs.
Glenn Stevens, governor of the RBA said in the official statement that the board has been looking to restrain demand in an economy which has been experiencing high inflation over the past year.
He added that the evidence is that the tight financial conditions, in conjunction with other factors including higher fuel costs and lower asset values, have exerted the needed restraint on demand.
It is looking more likely that household demand will remain subdued and overall economic growth slow over the period ahead. Inflation is likely to remain relatively high in the short term, with the CPI affected by the high global oil prices in mid year and other increases in raw materials prices, Stevens said.
But looking further ahead, the outlook for demand suggests that inflation in both CPI and underlying terms is likely to decline over time, provided wages growth remains contained. The Bank’s forecast remains that inflation will fall below 3 per cent during 2010, Stevens concluded.
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