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Homeowners have been granted a long awaited reprieve, with the Reserve Bank opting to drop interest rates by 25 basis points.

The cut continues what is becoming a tradition, with the Reserve Bank changing the cash rate on Melbourne Cup Day for the sixth year in a row.

It is also the first time in a year that rates have shifted in either direction, with last year’s race tarnished by a surprise 25 basis point bump.

The Reserve Bank’s decision comes after the TD Securities-Melbourne Institute data revealed inflationary pressure was at a 19-month low. The Institute’s inflation gauge showed a 0.1 percent rise in headline and trimmed mean measures, prompted largely by a massive drop in fruit and vegetable prices.

The rise keeps inflation at a 19-month low of 2.6 percent, well within the Reserve Bank’s target band. The Reserve Bank last cut interest rates in April 2009. Following a steady climb in 2010, interest rates have stayed on hold since last November. The last time the Reserve Bank stayed put on Melbourne Cup day was in 2005, midway through the cash rate’s year-long stint at 5.5 percent.  Story source: www.ninemsn.com.au