RBA rate announcement march cut

The official cash rate has been reduced from 2.25 per cent to a record-low 2.0 per cent, following last month’s 0.25 per cent reduction.

This is the first time the Reserve Bank board has made back-to-back rate cuts since May-June 2012.

Economists and commentators were fairly evenly split about whether the Reserve Bank board would cut the cash rate at today’s meeting or leave it on hold.

In a survey by comparison website finder.com.au, 16 of the 37 people surveyed expected a cut while the other 21 expected no change in the rate.

The rate-cutting camp noted that the low inflation rate gave the board room to move in an attempt to stimulate the economy and encourage a fall in the Australian dollar.

However, most experts felt the board would be reluctant to give more of a boost to the housing market and would want more time to assess the effects of last month’s rate cut.

ANZ chief economist Warren Hogan forecast today’s rate reduction because he said the central bank historically makes back-to-back cuts when it begins a new interest rate cycle.

“They've signalled that the economic outlook is a little bit weaker than they have previously been expecting,” Mr Hogan said.
Stephen Koukoulas from Market Economics also expected the board to move today due to Australia’s “rising unemployment rate, very low wages growth and well-contained inflation”.

Peter Boehm from Onthehouse said the February rate cut indicated underlying economic problems that were yet to be revealed at the end of 2014.

“Clearly the RBA is more worried about economic growth and rising unemployment than it is about fuelling house price growth, especially in the eastern states,” he said.

“You need more than a 0.25 per cent drop in interest rates to materially stimulate the economy, and that is why I think another cut is on the way.”