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Australia Monetary Policy October 2020

Australia: RBA stands pat in October

At its monetary policy meeting on 6 October, the Reserve Bank of Australia (RBA) decided to keep the cash rate unchanged at its all-time low of 0.25%. Moreover, the Bank reaffirmed that it will keep the target for three-year government bond yields at 0.25%.

The global health crisis and its associated lockdown measures hit the economy hard and weighed on the labor market in the first half of the year, prompting the RBA’s accommodative stance. However, activity seemingly started to recover in Q3, helped by supportive fiscal and monetary measures. Moreover, the functioning of financial markets has stabilized thanks to the Bank’s interventions, which are underpinning low borrowing costs and abundant credit supply. That said, the recovery is set to be bumpy and uneven as it is highly dependent on the evolution of the health crisis, as shown by the coronavirus outbreak in Victoria.

Moving forward, the Bank reaffirmed its commitment to maintain the cash rate at its current all-time low until the labor market returns to full employment and inflation rises sustainably within the 2.0%–3.0% target range. The outlook remains highly uncertain, however, which could weigh on consumers’ and investors’ spending decisions ahead.

The next monetary policy meeting is scheduled for 3 November.

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