Market news

4 August 2020

Reserve Bank of Australia holds key rate at record Low

RTTNews reports that Australia's central bank maintained its interest rate at a record low and quantitative easing unchanged as the package unveiled in March is supporting the economy as expected.

The board of Reserve Bank of Australia, governed by Philip Lowe, decided to maintain cash rate and the targeted yield on three-year government bonds of 25 basis points.

Lowe said the bank will buy government securities in the secondary market on Wednesday to ensure that the yield on 3-year bonds remains consistent with the target.

The bank vowed to maintain accommodative approach as long as it is required.

The RBA will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2-3 percent target band, Lowe said in a statement.

The RBA had reduced the key interest rate to the current record low of 0.25 percent at the March meeting. Also in March, the bank had introduced asset purchase programme to combat the downturn caused by the pandemic.

As Australians deal with the coronavirus, the economy is being supported by the substantial, coordinated and unprecedented easing of fiscal and monetary policy, the banker noted. It is likely that fiscal and monetary stimulus will be required for some time given the outlook for the economy and the labor market.

The downturn is not as severe as earlier expected and a recovery is now underway in most of Australia. However, the recovery is likely to be both uneven and bumpy, with the coronavirus outbreak in Victoria having a major effect on the Victorian economy, Lowe observed.

According to the baseline scenario, output falls by 6 percent over 2020 and then grows by 5 percent over the following year. Inflation is forecast to remain below 2 percent over the next couple of years.

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

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