Australia’s central bank kept its key interest rate at a record low and the target yield on three-year government bonds unchanged, and vowed to maintain its accommodative approach as long as required amid the global coronavirus pandemic.
The board of Reserve Bank of Australia, governed by Philip Lowe, decided to maintain cash rate and the targeted yield on three-year government bonds of 25 basis points. The outcome of the meeting came in line with expectations.
The bank said it is prepared to scale-up its bond purchases again and will do whatever is necessary to ensure bond markets remain functional and to achieve the yield target for 3-year Australian government securities.
The RBA had reduced the key interest rate to the current record low of 0.25 percent at the March meeting. Also in March, the bank had introduced asset purchase programme to combat the downturn caused by the pandemic.
Although economic conditions have stabilized recently and the downturn has been less severe than earlier expected, the bank noted that the nature and speed of the economic recovery remains highly uncertain.
Uncertainty about the health situation and the future strength of the economy is making many households and businesses cautious, and this is affecting consumption and investment plan, the bank observed.
As the economy is going through a very difficult period, it is likely that fiscal and monetary support will be required for some time, the bank said.
The bank pledged to maintain its accommodative approach as long as it is required.
The board will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2-3 percent target band, the bank added.
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