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CBA, NAB cut rates after RBA

AAP logoAAP 2/08/2016 By Marty Silk

Commonwealth Bank, National Australia Bank and Westpac have cut their variable home loan rates after the Reserve Bank dropped the official interest rate to a record low.

The RBA cut the cash rate by 25 basis points to 1.5 per cent at its August board meeting on Tuesday, following another weak inflation reading.

The 0.4 per cent rise in June quarter consumer prices, reported last week, took the inflation annual rate to just 1.0 per cent, a 17-year low and well beneath the RBA's two-to-three per cent target band.

"The board judged that prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing monetary policy at this meeting," RBA governor Glenn Stevens said in a statement on Tuesday afternoon.

The Commonwealth Bank of Australia passed on about half the RBA's rate cut, lowering its standard variable rate by 13 basis points to 5.22 per cent.

National Australia Bank then slashed its variable rate by 10 basis points to 5.35 per cent.

Westpac later cut its rate by 14 basis points to 5.29 per cent.

ANZ had not reacted to the RBA's announcement by 1830 (AEST) on Tuesday.

Commonwealth Bank managing director of economics Michael Blythe said as the focus was clearly inflation, the Reserve Bank may not be done with one cut before the end of the year.

"As we see the RBA's inflation forecasts on Friday, they will still show inflation remaining extremely low and keep alive the prospect of another rate cut later this year," he told AAP.

Mr Blythe noted the biggest element of the RBA's rates statement related to housing, an indication the central bank remained concerned about the potential of a rate cut to again stimulate housing prices.

"There's lot of explanation about why that's not going to happen. We'll see I guess," he added.

St George senior economist Janu Chan said the real question was what difference rate cuts would make in the current economic environment.

"The answer is probably not a lot. Rate cuts at this stage of the cycle may mean a lower exchange rate than otherwise," she said in a note.

"However, there are global factors which are helping to keep down inflation and there appears to be no impediments to obtaining financing to those who want to borrow."

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