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The Reserve Bank of Australia (RBA) has held the official cash rate at 0.25 per cent despite widespread anticipation that the central bank would cut rates this month.
Confidence had been mounting in a cut after RBA governor Philip Lowe recently made a speech in which he suggested that further monetary policy easing is coming.
Earlier this year, the RBA effectively commenced quantitative easing (QE) by purchasing government bonds on the secondary market, and also launched a multi-billion-dollar term funding facility (TFF) to maintain the flow of credit to SMEs.
The RBA also continues to provide liquidity support to the banking sector through repurchase (repo) transactions on the overnight money market.
In this month's Finder RBA Cash Rate Survey, 67 per cent of the 43 industry players and economists predicted a rate cut, with only a third accurately predicting a hold.
Graham Cooke, insights manager at Finder, commented: “Despite growing talk about a Cup Day cut, the RBA decided to hold fire on cutting the cash rate.
“The strength of the Australian dollar and a lagging Victorian economy supported the case for further easing, but the RBA decided to keep one of its only remaining bullets in the chamber.
“I suspect the horse races weren’t the only thing punters were betting on today,” Mr Cooke said.
Angela Jackson of Equity Economics said that the RBA is likely to maintain current settings until the economy shows signs of a sustained recovery.
“While the RBA may be concerned with a lack of momentum in jobs data, they will wait to see if Victoria reopening and state borders opening helps spur the recovery before moving rates down further,” she said.
More to come.
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