RBA cuts cash rate amid low inflation

Adam Smith 2 August 2016

The Reserve Bank of Australia has fallen in line with expectations today and cut the official cash rate to another historic low.

The RBA board today chose to trim the cash rate to 1.50%, citing low inflation and a moderating housing market. The move falls in line with experts’ expectations. The finder.com.au monthly Reserve Bank Survey found 56% of experts predicted a cut to the official cash rate.

LATEST: Which banks are passing on the August 2016 RBA interest rate cut?

The RBA made the move after inflationary data showed price growth well below the Reserve Bank’s 2-3% target band. Official inflation figures from the Australian Bureau of Statistics (ABS) show the consumer price index (CPI) edged up just 1% in the June quarter. The increase was the lowest annual inflation figure since June 1999.

Recent housing data also would have put the RBA board’s mind at ease. The CoreLogic Hedonic Home Value Index showed prices up 0.8% for July, with the pace of housing growth moderating.

While the Reserve Bank may have trimmed the cash rate, analysts have warned borrowers may not see the full benefit of the cut. Morningstar head of Australian banking research David Ellis told the Sydney Morning Herald banks were likely to withhold between five and 10 basis points of the 25 basis point cut. Commonwealth Bank seemed to fall in line with this expectation, as the bank became the first major to announce a cut, trimming 0.13% from its variable rate.

finder.com.au will be updating its full list of rate cuts as lenders announce. Check our lender round-up to see if your bank has passed on the RBA cut.

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