RBA monetary policy meeting today - to leave cash rate unchanged - preview
Reserve Bank of Australia statement due at 0430GMT Tuesday 4 August 2020
- RBA to keep the policy cash rate at the floor of 0.25% at its August meeting
- The slew of policy measures announced at its mid-March intermeeting have worked in containing domestic interest rates and market volatility - in March, the RBA reduced the policy cash rate to the 0.25% floor, announced QE and yield curve control (YCC) and a term funding facility. The RBA's YCC has worked well in anchoring 3Y interest rates; it has not had to engage in purchases for most of the past three months.
- Governor Lowe noted in a speech in July that the RBA was unlikely to change its policy mix near-term; we do not believe conditions onshore have changed sufficiently to alter that stance.
- The continued increase in coronavirus infections in Victoria and the spread to New South Wales is a concern; the re-imposition of lockdowns might also hurt growth - the RBA is likely to watch these events cautiously. Controlled relaxation of social distancing measures in other parts of the country is also likely to lead to increased activity in Q3. The success of its YCC measures and likely improvement in domestic activity would enable the RBA to stay on the sidelines in the near-term.
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