No movement in the cash rate of 0.25% from the Reserve Bank’s June meeting yesterday as the bank also continues to target the three-year bond rate at 0.25%.
The decision was widely expected, although there is still a small group of economists who believe the central bank should cut its key rate to a negative reading (following the Japanese and European central banks for example).
The decision came a day before the March quarter national accounts and GDP figures are released later this morning (Wednesday).
They could show a small positive rise in growth or a dip of up to 0.5% (see separate story). But whatever, they will be meaningless except as a starting point for 2020 growth.
In his post-meeting statement, RBA governor, Philip Lowe (who last week again laid out what he thinks should be happening to policy – more fiscal spending for longer to support employment and growth) made it clear the bank will do all its can to support the move back to full employment and an inflation rate that can be sustained in the target range of 2% to 3%.
There were some positives mentioned in the Tuesday statement (actually repeat comments from his appearance before the COVID-19 Senate Committee last week.
“It is possible that the depth of the downturn will be less than earlier expected,” Dr. Lowe said his statement.
“The rate of new infections has declined significantly and some restrictions have been eased earlier than was previously thought likely.
“And there are signs that hours worked stabilised in early May, after the earlier very sharp decline. There has also been a pick-up in some forms of consumer spending.”
“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 substantial, coordinated, and unprecedented easing of fiscal and monetary policy in Australia is helping the economy through this difficult period. It is likely that this fiscal and monetary support will be required for some time,” Dr. Lowe said.