RBA cuts 25bps, fiscal support, QE on the way – ANZ
|The Australia and New Zealand Banking Group (ANZ) analysts believe “another rate cut in April seems more likely than not, even with fiscal support arriving soon. This will trigger a discussion about QE.”
Key quotes:
“The RBA Board cut the cash rate 25bp to a record low of 0.5% at its March meeting.
Things are very fluid at present, which makes it difficult to take too firm a view about the likely evolution events. The statement holds out the prospect of a return to something approaching trend growth once the virus is contained.
The statement also notes that fiscal support is on the way.
We expect to see the Government announce fiscal measures relatively soon.
We’ll take the RBA at their word that 0.25% is the effective lower bound for the cash rate.
Reaching that point will immediately prompt speculation about the prospect of quantitative easing (QE).
Indeed, that speculation has already begun. We have argued that this next step was a long way off and would require exceptional circumstances for it to be taken. The potential scale of the economic shock from COVID-19 could, unfortunately, provide the required exceptional circumstances.
So we have to acknowledge that QE in 2020 is something that has to be considered.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.