RBA: Steady on monetary policy but cautious on the outlook - UOB

FXStreet reports that Lee Sue Ann, Economist at UOB Group, reviewed the latest RBA event (Tuesday).

“The Reserve Bank of Australia (RBA) decided to maintain its current policy settings in August, including the targets for the cash rate and the yield on 3-year Australian Government bonds of 25 basis points.”

“Given the uncertainties about the overall outlook, the Board considered a range of scenarios at its meeting.”

“It was evident that the RBA sounded more cautious, in light of the state of disaster being declared in Victoria. Victoria accounts for around 25% of the economy and it remains uncertain as to how long the restrictions will last and how effective they will be.”

“As far as monetary policy is concerned, the RBA has effectively exhausted conventional monetary policy by cutting the OCR to its self-imposed floor of 0.25%. Thus, any further action would seem to necessitate a move further into unconventional territory, and what is left in the ammunition bag is negative interest rates. RBA Governor Phllip Lowe, however, has been unenthusiastic about negative rates; athough we suspect that the RBA will have to consider this option if the situation deteriorates further. Clearly, this is very strong justification to keep monetary policy extraordinarily easy for the foreseeable future.”