The Reserve Bank of Australia (RBA) has cut its official cash rate by 25 basis points effectively bringing the cash rate down to 3 per cent, after seeing room for a modest adjustment in monetary policy.
The move brought the cash rate down to a 49-year low that was last seen in March 1960.
RBA Governor Glenn Stevens noted that debt-servicing levels had reduced as a result of historically low market and mortgage interest rates are and business loan rates being below recent averages.
“Nonetheless, the board judged that there was scope for a further modest adjustment to the cash rate”, Governor Stevens said in a statement.
Mr. Stevens also noted that while the overall demand for credit remained weak, the owner-occupied housing sector had picked up.
Borrowers however may not see the full benefits of the rate cut judging from recent comments from several large banks indicated that wholesale funding costs made it difficult to pass on a full rate cut to home-buyers and businesses.
The Commonwealth Bank of Australia was the first major to act on the rate cut, passing on a 10 basis point cut to its standard variable rate.
CBA’s standard variable rate will now stand at 5.64 per cent effective April 17.
