Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

UPDATE 1-Australia c.bank assessing various monetary policy options, A$ slips

Published 22/09/2020, 02:04 pm
Updated 22/09/2020, 02:06 pm

(Adds market reaction, economist comment)

By Swati Pandey

SYDNEY, Sept 22 (Reuters) - Australia's central bank is assessing various monetary policy options including currency market intervention and negative rates to meet its inflation and employment goals, Deputy Governor Guy Debelle said on Tuesday.

The Reserve Bank of Australia (RBA) had slashed interest rates to a record low 0.25% in an emergency meeting in mid-March to backstop the economy from the coronavirus crisis.

It also launched an "unlimited" government bond buying programme and a cheap funding facility for banks. It has held rates since then, saying it would maintain its "highly accommodative settings" as long as required to support the flagging economy. Tuesday, Debelle said the board was assessing other policy options "given the outlook for inflation and employment is not consistent with the Bank's objectives over the period ahead.

One option being considered is buying government bonds with maturities beyond three years. The RBA is currently targeting three-year yield at 0.25%.

Foreign exchange intervention was another potential tool, though Debelle said it was not clear whether this would be effective given the Australian dollar was "aligned with fundamentals." AUD/

A third option would be to lower the cash rate without taking it into negative territory. And, the final option was negative rates, though Debelle said the empirical evidence on its success was mixed.

The RBA has previously said on multiple occasions that negative rates were "extraordinarily unlikely" in Australia and Debelle reaffirmed that stance.

The Australian dollar AUD=D3 fell briefly below 72 U.S. cents after the speech but pared some of the losses to last fetch $0.7223.

"The nuance in our view was slightly dovish," RBC economist Su-lin Ong said.

The RBA's easing bias was also reinforced by Debelle's emphasis on a bumpy and uneven recovery and challenging labour market outlook.

"By continuing to highlight other policy measures without committing to any timelines, especially ahead of the upcoming 2020/21 Commonwealth Budget, the RBA is employing maximum flexibility," Ong added.

The Budget is due on Oct.6

"In these uncertain times, that would appear prudent."

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.