John Dagge, Herald Sun

THE Reserve Bank has cut the nation’s official interest rate to a new historic low, moving decisively after being delivered a shock deflation report.

The nation’s central bank cut the cash rate by 0.25 percentage points to 1.75 per cent at its monthly meeting today, the decision coming just hours before the Federal Budget is handed down.

The latest cut by the RBA follows last week’s dramatic slip in inflation.

The closely watched underlying measure of inflation, which strips out the impact of volatile items such as tobacco and petrol, came in at 1.55 per cent for the first three months of the year.

That is well below the Reserve Bank’s preferred 2-3 per cent target band and only the second time core inflation has fallen below that band in 15 years.

A survey of 27 economists by Bloomberg held ahead of today’s decision found they were evenly divided on whether the RBA would cut.

Extracted in full from Courier Mail.