RBA meeting December 2011: Rates Cut by 0.25% to 4.25%

The Reserve Bank of Australia (RBA) has cut official interest rates by 25 basis points to 4.25 per cent at its board meeting on December 6, 2011. It was the second interest rate cut in a row.

European debt crisis and what that means for the global outlook was the main reason for the rate cut with inflationary pressure under control now:

• Growth in the global economy has moderated this year after a strong performance in 2010.
• Financial markets have experienced considerable turbulence - especially in Europe.
• The terms of trade have now peaked and will decline somewhat in the near term.
• The unemployment rate has increased a little since mid year, but it still remains close to 5 per cent.
• Inflation is likely to be consistent with the 2-3 per cent target in 2012 and 2013.
• Lending rates are now around their average level of the past 15 years.
• Credit growth remains subdued and asset prices have declined further over recent months.

Overall, the Board concluded, on the basis of all the available information, that the inflation outlook afforded scope for a modest reduction in the cash rate. The Board will continue to set policy as needed to foster sustainable growth and low inflation over time.

How Australia's banks will react?

The biggest question now is how Australia's banks will react to the RBA's rate cut - will banks cut rates by the same amount as the RBA and risk the anger of shareholders or do they hold back and face the same anger from consumers and the government?

The rumor has it that none of the Big Four banks will pass on the rate cut in full, and one might be brave enough to ignore it altogether. However best mortgage rates are always NOT with Big Four and Bank of Queensland becomes the first bank to cut its interest rates by full 25 basis points to 7.36 per cent on their standard variable home loan rate.

So please fill out the form on this page and make sure you don't miss on the best Home Loan deal following this RBA decision...