RBA cuts cash rate to 2.5%

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The RBA has just announced a 25 basis point cash rate reduction, bringing the official interest rate down to a record low 2.5%.

Today’s announcement mirrors Bloomberg’s survey of 26 economists, 25 of which anticipated the cut.

A speech made late last week by RBA governor, Glenn Stevens, also indicated another rate reduction was on the cards, with Stevens admitting the RBA was becoming increasingly concerned about major areas of the Australian economy, particularly the passing of  mining and credit growth ‘booms’.

Stevens said that while globally financial conditions remain very "accommodative", the recent reassessment by markets of the outlook for US monetary policy has seen a noticeable rise in sovereign bond yields, from exceptionally low levels. Volatility in financial markets has increased and has affected a number of emerging market economies in particular.

He hopes that the depreciation of the exchange rate over time would help to foster a rebalancing of growth in the economy.

The Board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the inflation target over time.