RBA Reduces Rates by 0.25%

At it's meeting today, the RBA decided to reduce the official cash rate by 0.25% to 2.5%.   

They sighted growth being below trend and unemployment edging higher as being the main drivers for the decision.

Some of their comments from their statement was:

In Australia, the economy has been growing a bit below trend over the past year. This is expected to continue in the near term as the economy adjusts to lower levels of mining investment. The unemployment rate has edged higher. Recent data confirm that inflation has been consistent with the medium-term target. With growth in labour costs moderating, this is expected to remain the case over the next one to two years, even with the effects of the recent depreciation of the exchange rate.

They also highlighted a reduced Australian dollar would assist in fostering growth within the economy.

The Australian dollar has depreciated by around 15 per cent since early April, although it remains at a high level. It is possible that the exchange rate will depreciate further over time, which would help to foster a rebalancing of growth in the economy.

With rates being reduced and with the scope to cut further if required, this should foster growth moving forward.  With an election just after the next RBA meeting it will be interesting to see their decision in September.

The RBA's full statement can be found here.

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