reserve bank

As widely forecast, the Reserve Bank cut official interest rates 0.25 of a percentage point to a new record low of 1.25% in an attempt to stimulate a sluggish economy and eliminate spare capacity. The cut was the first since 2016 when the bank cut rates twice in May and August -- and many economists are predicting at least one more cut to 1% by the end of the year and maybe more next year.

The rate cut is a belated admission that the economy is idling and, with the government intent on removing any fiscal stimulus, the central bank has been forced to fire one of its remaining monetary policy shots despite concerns that it will have nothing left in the locker in the event of a recession.