(Australian Associated Press)
The Reserve Bank of Australia has kept the cash rate at a record low 0.25 per cent at its monthly board meeting as it assesses the extent of recovery after the coronavirus-driven economic downturn.
Economists had widely expected the central bank to hold the benchmark rate at the current level.
The RBA cut rates twice and announced quantitative easing measures in March in an effort to cushion the economy from the impact of the coronavirus pandemic.
Governor Philip Lowe on Tuesday said the RBA board had decided to maintain the current policy settings, including the targets for the cash rate and the 25-basis point yield on three-year Australian government bonds.
He noted conditions in financial markets have improved, with volatility declining and large raisings of both debt and equity.
“Leading indicators have generally picked up recently, suggesting the worst of the global economic contraction has now passed,” Mr Lowe said.
“Despite this, the outlook remains uncertain and the recovery is expected to be bumpy and will depend upon containment of the coronavirus.”
Australia’s government bond markets were operating effectively and the central bank has not had to purchase government bonds for quite some time, he said.
The RBA was prepared to scale up purchases again and do whatever was necessary to ensure bond markets remained functional and the three-year AGS yields stayed at current levels, he reiterated.
The RBA board pledged not to increase the cash rate target until progress was made towards full employment and it is confident inflation would be sustainably within the 2.0 per cent to 3.0 per cent target band.
The governor noted that an unprecedented 800,000 people have lost employment since March, with many others retaining their job only because of government and other support programs.
The substantial, coordinated and unprecedented easing of fiscal and monetary policy in Australia is helping the economy through this difficult period, he said, adding that fiscal and monetary support will be required for some time.