Reserve Bank cuts interest rates to a record low

By: Rachel Clayton and Rachel Pupazzoni

The Reserve Bank cut interest rates to a record low of 0.1 per cent on Tuesday.

The cut to 0.1 per cent is down from the previous record low of 0.25 per cent, which was announced earlier this year.

Alongside the drop in the official cash rate, the RBA lowered its three-year bond rate target to 0.1 per cent. The new record-low rate will also apply to the bank’s term funding facility.

The central bank confirmed it would buy $100 billion worth of Australian government bonds over the next six months to lift inflation and encourage lending and investment — a measure known as quantitative easing.

Reserve Bank Governor Philip Lowe stressed the bank was not printing free money for the state and federal governments and the bonds bought by the RBA would have to be repaid by governments at maturity.

“They’ll have to be repaid in exactly the same way as if the bonds were held by others,” he said.

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