RBA Cuts Rate Further, Launches Asset Purchases To Ease Covid-19 Impact
March 18 2020 - 11:27PM
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Reserve Bank of Australia decided to cut its key interest rates
further to a record low and launched a money printing scheme as the
spread of coronavirus, or Covid-19, disrupts economic activity and
financial markets.
At an emergency meeting on Thursday, the Reserve Bank Board
governed by Philip Lowe, decided to reduce the cash rate by 25
basis points to 0.25 percent from 0.50 percent. This was the second
reduction this same month.
On March 2, the rate was lowered by 25 basis points.
In the forward guidance, Lowe said the rate will not be
increased until progress is being made towards full employment and
the bank is confident that inflation will be sustainably within the
2-3 per cent target band.
The RBA Governor said the cash rate will remain at its current
level for some years, but not forever.
The bank will purchase government bonds in the secondary market
targeting the yield on 3-year bonds at around 0.25 percent. The
operation to be commenced on Friday is set to address market
dislocations.
In order to support credit supply to small and medium-sized
businesses, the RBA will provide a three-year funding facility to
authorized deposit-taking institutions at a fixed rate of 0.25
percent. The planned size of this facility is at least A$90
billion.
Further, exchange settlement balances at the central bank will
be remunerated at 10 basis points, rather than zero.
The bank will also continue its one-month and three-month repo
operations in its daily market operations until further notice. In
addition, the RBA will conduct longer-term repo operations of
six-month maturity or longer at least weekly, as long as market
conditions warrant.
In addition to the monetary policy easing, the government on
Thursday announced A$15 billion funds to support small and
medium-sized businesses.
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