The cash rate is at the lowest level in over two years (March 2010). The next RBA Board meeting is on June 5 2012. The Reserve Bank has justified the large rate cut in terms of inflation. “Over the coming one to two years, and abstracting from the effects of the carbon price, inflation will probably be lower than earlier expected, but still in the 2–3 per cent range.”

In short, a tremendous decision. Forget the old stereotype of the Reserve Bank being a super-conservative body. This is a courageous decision by the Reserve Bank. Not only will the super-sized rate cut provide real stimulus, but it will also boost much-needed confidence.

To read CommSec’s report and statement by Glenn Stevens, Governor Monetary Policy, click here.

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