SYDNEY (Reuters) - Australia’s central bank saw no need to adjust its policy measures in the current environment, minutes of its July policy meeting showed on Tuesday, while board members reiterated that negative interest rates remained “extraordinarily unlikely”.
The Reserve Bank of Australia (RBA) had, on July 7, left the cash rate at 0.25% in a widely expected decision and said the “accommodative approach will be maintained as long as it is required”.
Its package of measures includes the cash rate at 0.25%, an “unlimited” government bond buying programme, term funding facility for banks and an interest rate of 10 basis points on exchange settlement balances held by financial institutions at the RBA.
“Members agreed, however, to continue to assess the evolving situation in Australia and did not rule out adjusting the current package if circumstances warranted,” the minutes showed.
The coronavirus has crippled business and consumer activity across Australia where unemployment is running at a 22-year high as the nation braces for its first recession in nearly three decades.
The RBA has repeatedly said the shock to the Australian economy from the pandemic would be the most severe since the 1930s, while the outlook remained highly uncertain.
The July policy meeting took place when Australia’s second most populous state of Victoria had just started to see a spike in coronavirus cases, forcing authorities to re-introduce strict mobility restrictions including shutting its border with neighbouring New South Wales.
The RBA minutes also reiterated, citing a speech by Governor Philip Lowe in November 2019, that negative interest rates were extraordinarily unlikely.
There was no case for intervention in the foreign exchange market either, “given its limited effectiveness when the exchange rate is broadly aligned with its fundamental determinants, as at present.”
Governor Lowe is set to give a speech at 0300 GMT Tuesday on the topic “COVID 19, the Labour Market and Public-sector Balance Sheets.”
Reporting by Swati Pandey; Editing by Muralikumar Anantharaman & Shri Navaratnam