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Australia Monetary Policy April 2020

Australia: RBA keeps rates at all-time low in April; reaffirms quantitative easing measures

At a monetary policy meeting held on 7 April, the Reserve Bank of Australia (RBA) decided to keep the cash rate unchanged at an all-time low of 0.25%. Moreover, it reaffirmed it will keep the three-year government bond yields at the 0.25% target it set at an extraordinary policy meeting held on 19 March, in a bid to stabilize the functioning of financial markets.

The economy will most likely contract steeply in the short- to medium-term despite policy measures announced in several countries. On a more positive note, the RBA highlighted that, following a period of notable turmoil, the functioning of financial markets and particularly of government bond markets has improved substantially thanks to the Bank’s interventions—which has so far bought around AUD 36 billion of government bonds in secondary markets.

The outlook is surrounded by considerable uncertainly, as much will depend on the spread of the virus and the duration and intensity of the containment measures both domestically and globally. Looking forward, the Bank announced it will maintain rates at their current all-time low levels until the labor market reaches full employment and inflation rises sustainably within the 2.0%–3.0% target range.

The next monetary policy meeting is scheduled for 5 May.

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