RBA drops cash rate to 3.5%

The Reserve Bank has cut its cash rate by 25 basis points, marking the biggest back-to-back monthly reductions since the depth of the global financial crisis. The central bank today dropped its key lending rate from 3.75 per cent to 3.5 per cent - its lowest level since November 2009. The onus will now fall on commercial lenders to pass the reduction on to borrowers. Jessica Irvine: RBA battens down the hatches Malcolm Maiden: Australia remains the lucky country Michael Pascoe: RBA didn't mention the war Read the full RBA statement Home loan guide: what it means for you Chronology of rate moves since 1990 Today's cut was expected by 13 of 27 economists polled by Bloomberg, with four of them tipping the RBA would repeat May's surprise 50 basis-point reduction. The rest predicted no change. Advertisement: Story continues below Bank of Queensland wasted little time in announcing its decision to reduce borrowing rates - but by less than the RBA's move. The bank will cut 20 basis points from its standard variable rate, effective June 16, taking it to 6.91 per cent.  A 25 basis point cut, if passed along in full by a bank, reduces payments on an average $300,000 mortgage by $48 a month. Last month, the major banks - and most lenders - held back about one-quarter of the RBA's super-sized rate cut, citing the need to maintain profit levels as their own borrowing costs rise. The nation's savers, though, will be hoping the banks hold back on some of the cut when it comes to interest rates on deposits. Many people rely on interest payments to bolster their incomes, particularly with equity and property markets sinking. Cuts outlook The Australian dollar, meanwhile, rose one-third of a US cent after the rates decision, as some investors pared their expectations of further rate cuts to come. The local currency was trading at 97.52 US cents just before the announcement, and rose to 97.85 US cents in recent trading. Read more: http://www.smh.com.au/business/rba-cuts-rates-to-35-20120605-1ztil.html#ixzz1wv3qM5jV