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RBA keeps rates on hold

Maja Garaca Djurdjevic
Maja Garaca Djurdjevic
05 May 2020 1 minute readShare

Following its regular board meeting on Tuesday (5 May 2020), the RBA has announced its latest rate decision as the economy continues to struggle with the coronavirus pandemic.

Following two rate cuts in March, the RBA has decided to keep rates at 0.25 of a percentage point for the second consecutive month, as it continues to support the economy weighed down by the coronavirus crisis.  

“At its meeting today, the board decided to maintain the current policy settings, including the targets for the cash rate and the yield on three-year Australian government bonds of 25 basis points,” RBA governor Philip Lowe confirmed. 

Acknowledging that many people have lost their jobs and a sharp rise in unemployment is occurring, Mr Lowe said the containment measures have reduced infection rates.

“If this continues, a recovery in the global economy will start later this year, supported by both the large fiscal packages and the significant easing in monetary policies.”

Referencing the Australian economy, Mr Lowe said that given it is going through a very difficult period, there is considerable uncertainty about the outlook.

“Reflecting this uncertainty, the board considered a range of scenarios at its meeting. In the baseline scenario, output falls by around 10 per cent over the first half of 2020 and by around 6 per cent over the year as a whole. This is followed by a bounce-back of 6 per cent next year.”

He explained that there has been a substantial, co-ordinated and unprecedented fiscal and monetary response in Australia to the coronavirus and that “without this response, the outlook would have been even more challenging”.

“These policies are supporting the economy right now and will help when the recovery comes. They are supporting people’s incomes, maintaining the important connections between businesses and their employees, underpinning the supply of credit to businesses and households, and keeping borrowing costs low,” Mr Lowe said.

“The deferral of loan and other payments is helping people manage their cash flows. The Australian banking system, with its strong buffers of capital and liquidity, is also helping the economy traverse this difficult period.”

Admitting that the board also considered other scenarios, Mr Lowe said it 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.

RBA keeps rates on hold
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Maja Garaca Djurdjevic
Maja Garaca Djurdjevic

Maja Garaca Djurdjevic is the editor of My Business. 

Maja has a decade-long career in journalism across finance, business and politics. Now a well-versed reporter in the SME and accounting arena, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies and enabling citizens to influence decision-making.

You can email Maja on [email protected] 

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