Interest rate hits historic low

The Reserve Bank has cut the official interest rate to a historic low at its monthly meeting today.

The cash rate has been unchanged at 2 per cent since last May, but analysts last week predicted it would be cut on the back of lower than expected inflation figures. The RBA this morning voted to reduce the rate to 1.75 per cent.

The NAB announced almost immediately it would pass on the rate cut in full, but Westpac, the Commonwealth Bank and ANZ have yet to comment.

AMP chief economist and head of investment strategies Shane Oliver said last week there were several reasons the RBA was likely to consider cutting the official cash rate, but new inflation numbers would “push them over the line”.

HSBC Bank Australia chief economist Paul Bloxham also said the low inflation figure was a tipping point.

“The question is just about timing and whether it comes sooner rather than later. Once you know that inflation is below, it’s best if you move as soon as you can. So, even though it’s a Budget day and it’s less than ideal for the RBA, I do think they will likely cut rates,” he said.