RBA cuts rates on virus impact

The Reserve Bank of Australia cut its benchmark rate by 25 bps to 0.5% at today’s meeting. It was a mild surprise, with only 50% of polled economists expecting the cut. In the accompanying statement, the Bank said the outbreak of CoVid-19 is having a significant impact on the economy and has clouded the near term outlook for the global economy. It seems this rate cut may not be the last as the RBA also said it was prepared to ease monetary policy further, if the need arises.

The virus uncertainty will likely affect domestic spending and will likely delay a return to full employment and prevent the central bank from reaching inflation targets. It cautioned that Q1 GDP is expected to be “noticeably lower”. The link to the full statement can be found here.

The Australian dollar gave back only a small part of this morning’s gains after the announcement, and is still up 0.14% on the day.

AUD/USD Daily Chart

Source: OANDA fxTrade

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Andrew Robinson

Andrew Robinson

Senior Market Analyst at MarketPulse
A seasoned professional with more than 30 years’ experience in foreign exchange, interest rates and commodities, Andrew Robinson is a senior market analyst with OANDA, responsible for providing timely and relevant market commentary and live market analysis throughout the Asia-Pacific region. Having previously worked in Europe, since moving to Singapore he worked with several leading institutions including Bloomberg, Saxo Capital Markets and Informa Global Markets, proving FX strategies based on a combination of technical and fundamental analysis as well as market flow information. Andrew began his career as an FX dealer with NatWest and the Royal Bank of Scotland in the UK.