US rate cut means ‘cheaper borrowing’ for Australians

Chief Market Strategist at InvestSMART Evan Lucas says the US Federal Reserve’s rate cut means Australian banks can borrow at a lower rate and pass a lower rate on to the consumer. The Federal Reserve announced its third rate cut for the year on Wednesday, cutting it by a quarter percentage point to a range of 1.5 per cent and 1.75 per cent. “Our banks have to borrow from overseas, there isn’t enough free capital in Australia, to lend to all the lenders that are here,” Mr Lucas told Sky News. “A lowering of the federal funds rate means that the borrowing costs for all banks that borrow out of the US will get cheaper. “The ability to therefore pass that on [to the customer] should ramp up.” Image: Getty

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