The Reserve Bank of Australia deputy governor, Debelle, says coronavirus causing large increase in risk aversion, uncertainty.
Key statements
- Says lower interest rates to help offset demand shock from virus.
- Says recent fall in a$ will provide a helpful boost to economy.
- Says government stimulus package will provide welcome support to economy.
- Combined fiscal and monetary policy will help navigate a difficult period.
- Says the effect of the virus will come to an end at some point.
- Repeats impact of virus on tourism, education to take 0.5ppt from Q1 GDP.
- Says too uncertain to assess impact of the virus beyond march quarter.
- Australian banking system well capitalised, in a strong liquidity position.
- Have not seen any particular sign of pressure in our daily market operations.
- Liaison indicates no material disruption to exports of iron ore and coal at this stage.
- Says global economy will be materially weaker in Q1 and period ahead.
- China very focused on getting its economy back to full output.
- Monetary policy still works.
- Impact of exchange rate clearly still works.
- There are scenarios where we would have to consider QE.
- Would consider forward guidance and keeping bond yields down.
- Would aim to keep yields low rather than set a target for bond buying.
- Not a lot of stress in money market at present.
FX implications
AUD/USD has been on the backfoot since yesterday's disappointment in the NAB Business Survey and while the US dollar has taken back to the top spot n the FX board. There is nothing in here pertaining to immediate drastic measures but the market is pricing in around a 100% chance of a 25bp cut at the next RBA meeting on 7 April which is likely to continue to weigh on AUD.
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