Australia’s central bank keeps rate steady, signals easing ahead

A pedestrian wearing a face mask walks past the Reserve Bank of Australia (RBA) building, during a partial lockdown imposed due to the coronavirus, in Sydney, Australia, on Monday, May 18, 2020.

David Gray | Bloomberg | Getty Images

Australia’s central bank left its cash rate at a record low on Tuesday but hinted at further monetary easing to bolster the coronavirus-hit economy, which is suffering its worst contraction since the Great Depression.

The Reserve Bank of Australia (RBA) kept the rate unchanged at 0.25%, as widely expected in a Reuters poll, and at the level it has stood since an emergency cut in mid-March.

“The Board views addressing the high rate of unemployment as an important national priority,” RBA Governor Philip Lowe said in a statement announcing the outcome of the policy meeting.

“The Board continues to consider how additional monetary easing could support jobs as the economy opens up further.”

The government is due to release its budget on Tuesday evening, where it is expected to boost spending to support jobs and growth in the coronavirus-hit economy.

“Both fiscal and monetary support will be required for some time given the outlook for the economy and the prospect of high unemployment,” Lowe said.

The decision to hold fire comes after the central bank last month boosted the size of its term funding facility to around A$200 billion ($148.08 billion).

Economists polled by Reuters last week widely expect the RBA to deliver a 15 basis point cut to 0.1% in November.

Australia is set to forecast a record budget deficit of around A$200 billion ($143 billion) for 2020/21 in its federal budget, with its balance sheet driven into the red by a surge in welfare payments due to Covid-19 business closures and job losses.

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