RBA cuts rates on virus impact

The Reserve Bank of Australia cut its benchmark rate by 25 bps to 0.5% at today’s meeting. It was a mild surprise, with only 50% of polled economists expecting the cut. In the accompanying statement, the Bank said the outbreak of CoVid-19 is having a significant impact on the economy and has clouded the near term outlook for the global economy. It seems this rate cut may not be the last as the RBA also said it was prepared to ease monetary policy further, if the need arises.

The virus uncertainty will likely affect domestic spending and will likely delay a return to full employment and prevent the central bank from reaching inflation targets. It cautioned that Q1 GDP is expected to be “noticeably lower”. The link to the full statement can be found here.

The Australian dollar gave back only a small part of this morning’s gains after the announcement, and is still up 0.14% on the day.

AUD/USD Daily Chart

Source: OANDA fxTrade

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