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Interest rate cut by 1 per cent

The Reserve Bank has slashed its key interest rate by more than expected in its latest effort to prevent the economy from sliding into a recession.

The central bank lopped a full percentage point, or 100 basis points, off its key cash rate, reducing it to 4.25%.

That level matches its previous record low – reached in the wake of the September 11, 2001, terrorist attacks in the US – since the RBA began targeting rates about two decades ago.

The bank joins the Federal Government in attempting to avert a sharp slowdown that would snap 17 years of growth for the economy

The cut marks four months in a row of reductions, as the central bank tries to shield the domestic economy for a global slowdown.

Economists predicted the RBA would lower rates by only 75 basis points.

All up, the central bank has chopped 3 percentage points from the key rate since September, when concerns about a recession began to overshadow inflation concerns.

For a typical 25-year, $300,000 home loan, today’s cut if passed on in full by lenders will save borrowers about $193 a month in payments or $58,000 over the life of the loan.

Commercial lenders are under pressure by Canberra to pass on most if not all of the rate reductions to customers.

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