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- Australia’s Reserve Bank has slashed interest rates to an unprecedented low of 0.1 per cent
- The fresh all-time-low was announced on Melbourne Cup Day and marks the sixth time the rate has been cut since 2016
- Speaking to today’s decision, RBA Governor Philip Lowe said the cut and wider policy package would target job creation and support Australia’s economic recovery
- It seems the rate won’t increase until inflation falls between 2 and 3 per cent — something the RBA doesn’t expect to occur in the next three years
- In conjunction with today’s cash rate slash, the RBA governor suggested unemployment was set to peak 2 per cent lower than originally forecast
- The Reserve Bank’s board now believes the jobless rate will peak just below 8 per cent before falling to 6 per cent two years from now
Australia’s Reserve Bank has slashed interest rates to an unprecedented low of 0.1 per cent.
The fresh all-time-low was announced on Melbourne Cup Day and marks the sixth time the rate has been cut since 2016.
The Reserve Bank of Australia (RBA) had brought the rate down to the once-historic 0.25 per cent low earlier this year.
Speaking to today’s decision, RBA Governor Philip Lowe said the cut and other measures announced by the Reserve Bank would target job creation and support Australia’s economic recovery.
“In Australia, the economic recovery is underway and positive GDP growth is now expected in the September quarter, despite the restrictions in Victoria. It will, however, take some time to reach the pre-pandemic level of output,” the Governor reported.
It seems the newly-lowered cash rate is unlikely to change in the short term: the RBA says it won’t increase the rate again until inflation falls between 2 and 3 per cent.
“For this to occur, wages growth will have to be materially higher than it is currently. This will require significant gains in employment and a return to a tight labour market,” Philip Lowe commented.
“Given the outlook, the board is not expecting to increase the cash rate for at least three years,” he continued.
In a bid to lift inflation, the RBA also confirmed it would purchase $100 billion in government bonds within the next six months.
And in conjunction with today’s cash rate slash, the RBA governor suggested unemployment was set to peak 2 per cent lower than originally forecast.
The Reserve Bank’s board now believes the jobless rate will peak just below 8 per cent before falling to 6 per cent two years from now.
