OFFICIAL CASH RATE CUT TO 1.50%. THE LOWEST CASH RATE EVER!

Today the Reserve Bank of Australia (RBA) met for its August meeting and decided to cut the official cash rate by 25 basis points to just 1.50 per cent, creating the lowest cash-rate ever on record!


The decision follows the release of June quarter inflation data last week that revealed inflation has slipped well below the RBA's target range. The RBA is also concerned the Aussie dollar remains stubbornly high compared to other global currencies, which tends to have a dampening effect on economic growth.


Forecasters remain divided over the possibility of further rate cuts this year. On the one hand, strong employment data suggests the economy is starting to respond to the stimulus the RBA has already applied and a further cut may not be necessary if the economy continues to improve following today's cut. On the other hand, the inflation figures may indicate a softening trend that could require further stimulus to lift the inflation rate into the RBA's target band of around 2 per cent. Global economic developments, such as the possibility of a rate rise in the US, will most likely prove to be the deciding factor.