RBA’s Lowe Says ‘Not Unreasonable’ to Expect Another Rate Cut

RBA announces June cash rate

Reserve Bank looks to jolt alleged "strong economy" with rate cut

In good news for millions of home owners, mortgage repayments are set to fall, after the Reserve Bank today cut the cash rate for the first time in almost three years.

Mortgage rates for owner occupiers are already around the lowest level since the 1960's and lenders are generally expected to pass on most, if not all of the cash rate cut to mortgage interest rates.

The governor broke with his usual practice of not insisting Australia's major banks pass the rate cut through in full, citing their lower funding costs and fall in retail deposit rates to argue there was no excuse for holding back. "The answer here is that the board has not yet made a decision, but it is not unreasonable to expect a lower cash rate", he said.

The cut was the first since 2016 when the bank cut rates twice in May and August - and many economists are predicting at least one more cut to 1% by the end of the year and maybe more next year.

The RBA announced a 25 basis point cut to 1.25%, making official the speculation that the first rate adjustment since August 2016 was the inevitable outcome of today's meeting.

"We are facing economic challenges both domestically and internationally, particularly from the trade tensions between China and the US", Mr Frydenberg told Nine's Today program this morning.

"Full pass-through would also mean that the economy receives the full benefit of today's policy decision", he said.

"It will assist with faster progress in reducing unemployment and achieve more assured progress towards the inflation target", he added.

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In contrast, Athena, RACQ and Reduce Home Loans have announced they'll be passing on the full 0.25 per cent cut.

"Given this, the possibility of lower interest rates remains on the table".

"We heard from the royal commission that the banks were putting profits before people", he told the Australian Financial Review.

"A strong dynamic business sector is the best way of creating jobs", said Lowe.

The Reserve Bank is widely expected to drop the rate to 1.25 per cent on Tuesday, in an effort to lift employment conditions and preserve its inflation target.

Mr Frydenberg met with the CEOs of the four big banks in recent days to urge them to pass on the benefits of a lower rate, if it happens.

While Commonwealth Bank and NAB said they would pass the entire 25 basis point reduction, ANZ said it would only reduce its variable mortgage rates by 18 basis points.

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