RBA Lowers The Cash Rate

Posted in: Insights, News

03/03/2020

As expected, at its monthly Board Meeting today, the RBA lowered the cash rate by 0.25% to a new record low of 0.50%.

The announcement on the RBA website had a strong focus on the Coronavirus and its recent impacts on the economy as a significant contributor to the decision to reduce rates. Probably the most significant statement in the RBA announcement is the last sentence which states, ‘The Board is prepared to ease monetary policy further to support the Australian economy’. This is a backflip from previous commentary from the RBA Governor where he stated that 0.50% would be as low as he will allow the cash rate to go and if the economy required further support it would be done by other means, such as quantitive easing, or cash stimulus. However, as we have seen with other cash rate reductions in recent times, it remains to be seen how much of the rate cut, if any, that the various Lenders will pass on to borrowers. And conversely, how much of a hit savers will take for their funds on deposit. It remains to be seen whether a 0.25% cut will have any significant impact, or whether perhaps the RBA should have jolted the economy awake with a move to a 0.25% cash rate, or even a 0% cash rate.

Mark Lewis
Managing Director
Bernie Lewis Home Loans