Powered by MOMENTUM MEDIA
moneymanagement logo
 
 

RBA: Low rates could last for three years

RBA/Reserve-Bank/interest-rate/rate-cut/Philip-Lowe/

19 March 2020
| By Laura Dew |
image
image image
expand image

Reserve Bank of Australia governor Philip Lowe has said the central bank is trying to “build a bridge to recovery” for the Australian economy but low rates could last for an extended period of time and job losses could be “significant”.

Rates were cut from 0.5% to 0.25% today, a historic low for the RBA, and the same rate as the Bank of England, Federal Reserve and Reserve Bank of New Zealand.

In a rare speech following the cut, Lowe said: “The Reserve Bank board did not take these decisions lightly. But in the context of extraordinary times and consistent with our broad mandate to promote the economic welfare of the people of Australia, we are seeking to play our full role in building that bridge to the time when the recovery takes place.”

He had previously said 0.25% was the effective lower bound and he reiterated this would be the lowest the RBA would go, saying the bank had "done it all can" with the cash rate. Instead, the focus would now be on alternative stimulus packages.

He said this 0.25% rate was likely to last for an “extended period of time” and progress towards full employment and the inflation target would be “very gradual”. This extended period could be as long as three years.

As to when the rate would change, he said the RBA would want the coronavirus to be contained, the market to be in a recovery phase and progress being made towards full employment and the inflation target.

“We are expecting a major hit to economic activity and income in Australia that will last for a number of months. We are also expecting significant job losses. The scale of these losses will depend on the ability of businesses to keep workers on during this difficult period,” he said.

“It is also important to repeat that we are expecting a recovery once the virus is contained. The timing and strength of that recovery will depend in part upon how successful we are, as a nation, in building that bridge to the other side. When that recovery does come, it will be supported by the low level of interest rates.”

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

Significant ethical issues there. If a relationship is in the process of breaking down then both parties are likely to b...

2 weeks 6 days ago

It's not licensees not putting them on, it's small businesses (that are licensed) that cannot afford to put them on. The...

3 weeks 6 days ago

So we are now underwriting criminal scams?...

7 months ago

After last month’s surprise hold, the Reserve Bank of Australia has announced its latest interest rate decision....

3 weeks 1 day ago

WT Financial’s Keith Cullen is eager for its Hubco initiative to see advice firms under its licence trade at multiples which are catching up to those UK and US financial ...

3 weeks 5 days ago

While the profession continues to see consolidation at the top, Adviser Ratings has compared the business models of Insignia and Entireti and how they are shaping the pro...

1 week ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND