Reserve Bank cuts interest rates

The Reserve Bank cut interest rates by 25 basis points today, marking the first official move in rates since Melbourne Cup day last year.

The RBA reduced the official cash rate to 4.50 per cent from 4.75 per cent, giving homeowners a $600 reduction on annual mortgage repayments for a $300,000 loan.

The outcome of the latest RBA board meeting marks the first cut since April, 2009. (More From Yahoo!7 Finance: Highest Paying Jobs in Australia)

The decision was on the cards, with eleven of the 17 economists surveyed by AAP last week saying they expected the RBA to lower interest rates.

RBA governor Glenn Stevens said recent information suggested the subdued demand conditions and the high exchange rate had contained inflation recently.

"CPI inflation on a year-ended basis remains above the target, due to the effects of weather events last summer, but is now starting to decline as production of key crops recovers," he said in a statement accompanying the decision on Tuesday. (More From Yahoo!7 Finance: Inside The World's First Billion-Dollar Home)

With labour market conditions now softer, the likelihood of a significant acceleration in labour costs outside the resources and related sectors in the near term had lessened, Mr Stevens said.

"With overall growth moderate, inflation now likely to be close to target and confidence subdued outside the resources sector, the board concluded that a more neutral stance of monetary policy would now be consistent with achieving sustainable growth and two to three per cent inflation over time," he said.

Most tipsters began forecasting a cut in official interest rates last week, after official inflation figures came in well below expectations for the September quarter. (More From Yahoo!7 Finance: Top 10 Highest Paid Government Leaders)

The TD Securities-Melbourne Institute measure of consumer prices showed that trend continuing for the month of October.

The index was up just 0.1 per cent, the same modest rise as for September.

TD Securities' head of Asia-Pacific research Annette Beacher says a fall in fruit and vegetable prices helped.

"We saw some increases in holiday travel and accommodation and the cost of a newly built house," Ms Beacher said. (More From Yahoo!7 Finance: Amazing And Absurd Places For Rent)

"They are more or less offset by a rather dramatic fall again in fruit and vegetable prices."

Meanwhile the Federal Government is demanding the banks pass on any possible rate cut in full.

Assistant Treasurer Bill Shorten has told AM that if the Reserve Bank does cut rates banks must relieve the financial pressures on families. (More From Yahoo!7 Finance: For Sale: Australia's Most Expensive Properties)

"Banks are doing well, and good luck to them," added Caton "[But] banks should pass on in full the Reserve Bank decisions if they lower the cash rate,"

"No question, pass it on in full."

What Will You Save?

The family savings in mortgage repayments based on State & Territory average loan sizes - following a cut of 25 basis points.