The Reserve Bank has cut the interest rate to a new record low 0.25 per cent as part of a suite of economic support to cushion the blow of the pandemic caused by the CCP virus.
Thursday’s widely-anticipated emergency rate cut means the central bank will also pull the trigger on its first-ever quantitative easing program in a bid to boost cash supply and encourage lending and investment.
The RBA had already reduced the cash rate to 0.5 per cent at its regular meeting this month in a bid to buttress the economy amid rising fears of a COVID-19-induced recession.
The Epoch Times refers to the novel coronavirus, which causes the disease COVID-19, as the CCP virus because the Chinese Communist Party’s coverup and mismanagement allowed the virus to spread throughout China and create the global pandemic we are now facing.
Governor Philip Lowe said on Thursday the RBA would buy Australian government bonds in the secondary market with a target yield on three-year bonds of around 0.25 per cent.
It will also provide a term funding facility for the banking system, with particular support for credit to small and medium-sized businesses.
This will be achieved through purchases of government bonds in the secondary market.
Exchange settlement balances at the Reserve Bank will be remunerated at 10 basis points, rather than zero as would have been the case under the previous arrangements.
This will mitigate the cost to the banking system associated with the large increase in banks’ settlement balances at the Reserve Bank that will occur following these policy actions.
The Reserve Bank will also continue to provide liquidity to Australian financial markets by conducting one-month and three-month repo operations in its daily market operations until further notice.
The Aussie dollar bounced on the announcement, jumping from a near 18-year low 55.41 U.S. cents to 55.55 U.S. cents by 2:35 p.m. AEDT.
By Alex Druce