Reserve Bank Makes Emergency Rate Cut In Coronavirus Rescue Plan
The official cash rate has been slashed to just 0.25 percent, as the Reserve Bank stages a bid to stimulate the economy amidst coronavirus recession fears.
The RBA cut the official cash rate in half on Thursday at an extraordinary meeting outside its usual decision on the first Tuesday of each month -- citing a need "to support jobs, incomes and businesses."
As financial markets worldwide are pummelled by the impact of the global coronavirus outbreak, the RBA slashed interest rates to just 0.25 percent -- another historic low, from the previously unprecedented 0.5.
The Reserve Bank's decision was made in hopes of stimulating the local economy, in a bid to stave off a possible recession. RBA governor Philip Lowe said the virus was having "a very major impact on the economy and the financial system", causing "major disruptions to economic activity across the world."
"The primary response to the virus is to manage the health of the population, but other arms of policy, including monetary and fiscal policy, play an important role in reducing the economic and financial disruption resulting from the virus," Lowe said in a statement.
"At some point, the virus will be contained and the Australian economy will recover. In the interim, a priority for the Reserve Bank is to support jobs, incomes and businesses, so that when the health crisis recedes, the country is well placed to recover strongly."
Further details of the RBA's unprecedented measures will be revealed at a press conference at 4pm (eastern time).
Lowe also announced the RBA would set a new target for the yield on three-year government bonds "of around 0.25 per cent", which would include the buyback of bonds currently in the market, starting Friday.
The RBA will " provide a three-year funding facility" to banks and financial institutions, "at a fixed rate of 0.25 per cent", of at least $90 billion. Extra funding will be available if banks increase borrowing to small and medium businesses.
Lowe said Australia's financial system was "resilient and well placed to deal with the effects of the coronavirus", and said further measures could be "drawn down" if needed.
"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," he said.
More to come.