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RBA announces April interest rate decision

The Reserve Bank of Australia has held its meeting for April. Images: Getty
The Reserve Bank of Australia has held its meeting for April. Images: Getty

The Reserve Bank of Australia (RBA) has kept the official interest rate on hold at 0.25 per cent, while warning the country is in for a “very large” economic contraction.

The RBA has previously flagged it will take interest rates no lower than 0.25 per cent, and that further policy movements will come in different forms, including quantitative easing.

All 23 experts on Finder’s interest rate panel predicted a hold verdict.

“Most economists highlighted that the RBA will treat 0.25 per cent as if it is 0 per cent and have no appetite to cut further,” Finder insights manager Graham Cooke said.

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“This leaves only one effective tool in the RBA’s armoury: quantitative easing,” Cooke said.

However, the bank has not shifted its stance on the policy in today’s meeting, according to the statement from RBA governor Philip Lowe.

“There is considerable uncertainty about the near-term outlook for the Australian economy. Much will depend on the success of the efforts to contain the virus and how long the social distancing measures need to remain in place,” Lowe said following the meeting today.

“A very large economic contraction is, however, expected to be recorded in the June quarter and the unemployment rate is expected to increase to its highest level for many years.”

Lowe said markets around the world have shown some signs of improvement, partly reflecting the rate cuts implemented by central banks. The Reserve Bank of New Zealand felled rates by 0.75 per cent last month, while the US Federal Reserve also slashed rates and embarked on a program of quantitative easing.

“In Australia, the yield on 3-year Australian Government bonds is now around the target level set by the Board and the functioning of the government bond markets has improved. The bank will do what is necessary to achieve the 3-year yield target, with the target expected to remain in place until progress is being made towards the goals for full employment and inflation.”

He said the bank has bought around $36 billion in government bonds from secondary markets since the target was introduced, and plans to purchase fewer bonds should conditions improve.

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