The Age – Derek Mumford 01/05/12

RBA slashes interest rates

The central bank today cut its official cash rate by 50 basis points – twice the amount expected by economists – to 3.75 per cent.

Today’s surprise reduction, the first by the RBA this year, is the biggest since February 2009 and reflects the bank’s concern that the economy needs an extra shot in the arm.

“Economic conditions have been somewhat weaker than expected” … Reserve Bank Governor Glenn Stevens. Photo: Rob Homer

Attention will now shift to the commercial banks as borrowers – and depositors – wait to see how much the lenders cut interest rates, and how soon. ANZ customers, though, will probably have to wait until Friday, May 11, before they learn of the change.

The RBA indicated that the size of today’s cut is needed in part because the central bank anticipates commercial lenders won’t pass along the full reduction.

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