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RBA surprises market with cash rate decision

The Reserve Bank of Australia has delivered the decision of its monthly board meeting.

Board members decided to cut the official cash from 1.75 per cent to a new record low of 1.50 per cent.

This is the second rate reduction in three months by the central bank, having slashed the cash rate by 25 basis points in May.

According to a finder.com.au survey of 31 economists and commentators, all but one expected rates to remain on hold.

Market Economics’ Stephen Koukoulas correctly predicted today’s decision based on the downside risks to the global economy, which he said had “intensified to the point where a cautionary rate cut would be prudent”.

The other 30 experts surveyed cited the federal election, Brexit and the upcoming CPI figures among the reasons behind why the cash rate would stay put.

Greater Bank CEO Scott Morgan said there was nothing in recent data to suggest further rate cuts were needed.

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“There is no need for a knee jerk response to Brexit or other issues,” Mr Morgan said.

“I think the RBA will want the election to be out of the way and [want] some time to look at how the economy and markets are responding to the previous cut.”

Moody’s Analytics’ Emily Dabbs said monthly indicators showed the economy was continuing to perform well.

“The impact of Brexit on Australian markets is relatively minor. The central bank will wait until the CPI data release to assess inflation pressures,” Ms Dabbs said.

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