Tuesday, 07 April, 2020

ere are the KEY TAKEAWAYS from today’s Reserve Bank of Australia policy decision

Here are the KEY TAKEAWAYS from today’s Reserve Bank of Australia policy decision:

  • The RBA left its policy rates unchanged, at 0.25% for both the cash rate and the new three-year government bond yield target, as expected by economists. The central bank also noted that its new funding-for-lending facility is now up and running, with the first drawing yesterday; the program covers at least A$90 billion
  • The central bank said there are signs that markets “are working more effectively than they were a few weeks ago” around the world, thanks in part to “substantial” measures taken by policy makers. In Australia, the RBA is likely to pare back its daily liquidity operations in the near term given the substantial amount of funding now already in the system. Offerings of longer-term funding will continue, but there may be fewer such operations, depending on market conditions
  • The RBA said it’s spent A$36 billion on federal, state and territorial government bonds so far, and if conditions continue to improve, “smaller and less frequent purchases” are likely. Still, the RBA will “do what is necessary” to achieve the three-year yield target, which will be kept “until progress is being made towards the goals for full employment and inflation.” Similarly, the 0.25% cash rate won’t be raised until the RBA is confident that inflation will be sustainably within the 2–3% target band
  • Governor Lowe’s statement warned that “a very large economic contraction” is in store, and the unemployment rate is set to climb to its highest in many years. Coordinated monetary and fiscal stimulus will help to soften the blow, and help ensure a recovery once the coronavirus containment measures are removed
  • The Aussie extended gains, as did longer-dated bond yields, after the statement. The Australian dollar was up about 1% against the U.S. dollar and 10-year yields were about 9 basis points higher, at 0.87%, as of 3:02 p.m. in Sydney

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