RBA Cuts Rate to a Record Low 2.5%

Australia’s central bank cut its benchmark interest rate to a record low in a boost to Prime Minister Kevin Rudd’s bid for a come-from-behind election win.

Governor Glenn Stevens and his board reduced the overnight cash-rate target by a quarter percentage point to 2.5 percent, the Reserve Bank of Australia said in a statement in Sydney today. Twenty-six of 27 economists surveyed by Bloomberg News predicted the eighth cut since late 2011, while money markets had priced in a reduction as a near certainty.

The easing reflects contained inflation and falling commodity prices, and follows a 13 percent slide in the local dollar in the past three months. Rudd, who called an election for Sept. 7, may benefit politically in a nation where about 90 percent of mortgagees have variable-rate loans, while the opposition has said a cut would reflect a weakening economy.


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