RBA Keeps cash rate on hold


At its June Board meeting, the RBA has decided to maintain its current policy settings – this includes holding the official cash rate at 0.25%. In a statement accompanying the decision, RBA Governor Philip Lowe said – Over the past month, infection rates have declined in many countries and there has been some easing of restrictions on activity. If this continues, a recovery in the global economy will get underway, supported by both the large fiscal packages and the significant easing in monetary policies. ... In Australia, the government bond markets are operating effectively and the yield on 3-year Australian Government Securities (AGS) is at the target of around 25 basis points. Given these developments, the Bank has purchased government bonds on only one occasion since the previous Board meeting, with total purchases to date of around $50 billion. The Bank is prepared to scale-up its bond purchases again and will do whatever is necessary to ensure bond markets remain functional and to achieve the yield target for 3-year AGS. The target will remain in place until progress is being made towards the goals for full employment and inflation. ... The Bank's market operations are continuing to support a high level of liquidity in the Australian financial system. Authorised deposit-taking institutions are making use of the Term Funding Facility, with total drawings to date of around $6 billion. Further use of this facility is expected over coming months. ... The Australian economy is going through a very difficult period and is experiencing the biggest economic contraction since the 1930s. Notwithstanding these developments, it is possible that the depth of the downturn will be less than earlier expected. The rate of new infections has declined significantly and some restrictions have been eased earlier than was previously thought likely. ... However, the outlook, including the nature and speed of the expected recovery, remains highly uncertain and the pandemic is likely to have long-lasting effects on the economy. In the period immediately ahead, much will depend on the confidence that people and businesses have about the health situation and their own finances. ... The Board 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 per cent target band. To read the full statement, go to https://www.rba.gov.au/media-releases/2020/mr-20-15.html

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