RBA interest rate cut decision The Reserve Bank has slashed interest rates by 25 basis points to a historic low of 2.75 per cent, the first reduction this year. The decision followed a spate of soft economic data that increased calls by industry groups and other observers for a lower cash rate. NAB was the first of the big four banks to lower its standard variable home loans. It cut the rate by 25 basis points to 6.13 per cent per annum. A further decline in the cash rate was appropriate to encourage sustainable growth in the economy ... Glenn Stevens. After NAB's move to pass on the 0.25 basis point cut in full, the Commonwealth Bank and Westpac have put their interest rates under review, bank spokespeople said. ANZ Bank will make a decision on interest rates on Friday as part of its regular review. Financial markets and economists have been split over whether the central bank would continue its easing cycle, which has seen 175 basis points of cuts since November 2011. The Australian dollar fell below 102 US cents following the decision. It was hovering at about 102.38 US cents just before 2.30pm. RBA governor Glenn Stevens. Appropriate to encourage sustainable growth "The Board has previously noted that the inflation outlook would afford scope to ease further, should that be necessary to support demand," RBA governor Glenn Stevens said in a statement. At today's meeting the Board decided to use some of that scope. It judged that a further decline in the cash rate was appropriate to encourage sustainable growth in the economy, consistent with achieving the inflation target. This is the first time the central bank has cut interest rates below 3 per cent since it began setting monetary policy in 1990. JP Morgan economist Tom Kennedy said the RBA was keeping its easing bias, leaving the door open to further cuts if they were needed to stimulate economic activity. "I think what it's really come down to is that the board has put a lot of emphasis on the jobless rate moving higher," said Mr Kennedy. Business investment remains pretty soft and I think dwelling investment also remains soft. They are the things we have seen over the past month or so. It looks like they have not put too much emphasis on those really strong retail figures. I think they are still looking for a bit of lift in the construction sector and the non-mining sectors. Low inflation 'allowed for rate cut' "The most likely reason that they cut is because they can, because inflation is low," UBS fixed income strategist Matthew Johnson said. There are some modest tweaks in the statement, but broadly speaking there aren't many changes to the statement. Mr Johnson said the sense from the statement was the RBA would keep the cash rate on hold for a few months as they wait for more economic data to come in. Strong Australian dollar Mr Stevens added that while an easing in interest rates has flowed through to the economy, the Australian dollar remained at a "historically high level over the past 18 months." "Moreover, the demand for credit remains, at this point, relatively subdued," he said. Financial markets were pricing in a 50 per cent chance of a 25 basis points reduction for May, and tipping at least 50 basis points of cuts by the end of the year. What will the banks do Attention now turns to the big banks and other mortgage lenders, and whether they would follow NAB in passing on the full 25 basis points of cuts. The Bank of Queensland also lowered its rates by 25 basis points to 6.26 per cent, citing lower funding cost in the wholesale market. UBank, launched in 2008 by NAB, also reduced its standard variable rate by 25 basis points to 5.12 per cent. "The standard variable housing rate stands at 6.45 per cent, still well above the lows of 5.75 per cent that held over April and May 2009, and above the previous low of 5.38 per cent in July 1968 and above the record low of 5.00 per cent set in May 1964," CommSec chief economist Craig James said in a research note. In figures released today, Australia's trade balance hit a surplus of $307 million in March after a $111 million deficit in February. At the same time, Australian house prices edged 0.1 per cent higher in the March quarter but lower than economists" expectations, echoing fears of tepid growth in the sector. The chief executive of Australia's largest building product supplier, Mike Kane, yesterday warned that housing demand had stalled and could be going backwards despite the recent rate cuts. Data released yesterday showed that seasonally adjusted retail sales data for March was softer than expected, as job advertisements fell in April for the second consecutive month and inflation for the same month remained subdued. Retail trade volumes, which represent sales excluding inflation, rose 2.2 per cent, the strongest quarterly increase since March 2007.