RBA cuts rates to historic 0.25% low

The Reserve Bank of Australia (RBA) has cut rates again from 0.5% to a historic low of 0.25% and announced a ‘comprehensive package’ to prop up the economy.

In a statement from the central bank, it said rates would not be raised until progress was made towards full employment and inflation was sustainably within its 2-3% target range.

The Bank has previously said 0.25% would be the lowest it would go with interest rates.

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The four measures announced were:

  • A reduction in the cash rate target to 0.25 per cent;
  • A target for the yield on 3-year Australian Government bonds of around 0.25 per cent;
  • A term funding facility for the banking system, with particular support for credit to small and medium-sized businesses; and
  • Exchange settlement balances at the Reserve Bank will be remunerated at 10 basis points, rather than zero as would have been the case under the previous arrangements.

Governor Philip Lowe said: “The various elements of this package reinforce one another and will help to lower funding costs across the economy and support the provision of credit, especially to small and medium-sized businesses.

“Australia's financial system is resilient and well placed to deal with the effects of the coronavirus. The banking system is well capitalised and is in a strong liquidity position. Substantial financial buffers are available to be drawn down if required to support the economy.

“The Reserve Bank is working closely with the other financial regulators and the Australian Government to help ensure that Australia's financial markets continue to operate effectively and that credit is available to households and businesses.”

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