RBA slashes rates to record low

Tuesday, 5th May 2015
Categories: Market News, Newsletter

interest rate graphicThe Reserve Bank of Australia (RBA) has cut the official cash rate to 2% during its May board meeting.

Announcing the decision, RBA governor Glenn Stevens said the bank’s decision to reduce the rate from 2.25% was to help “reinforce recent encouraging trends in household demand”.

“In Australia, the available information suggests improved trends in household demand over the past six months and stronger growth in employment,” Mr Stevens said.

“Low interest rates are acting to support borrowing and spending, and credit is recording moderate growth overall, with stronger lending to businesses of late.”

Despite the improving conditions, Mr Stevens noted that the private and public sector had reduced spending.

“The economy is therefore likely to be operating with a degree of spare capacity for some time yet,” Mr Stevens said.

“Inflation is forecast to remain consistent with the target over the next one to two years, even with a lower exchange rate.”

Mr Stevens said the RBA was still working to ensure the housing market remained in check.

“Growth in lending to the housing market has been steady over recent months,” he said.

“Dwelling prices continue to rise strongly in Sydney, though trends have been more varied in a number of other cities. The bank is working with other regulators to assess and contain risks that may arise from the housing market.”