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RBA makes surprise February cash rate call

RBA makes surprise February cash rate call
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The central bank has announced a new record-low cash rate in its February board meeting, a decision that was unexpected by the market.

The Reserve Bank of Australia (RBA) has cut the official cash rate to a new record low of 0.05 per cent this month, a move that was not expected by the markets.

After cutting the cash rate to a record low of 0.10 per cent in November 2020, governor Philip Lowe had revealed that the RBA did not expect to increase the cash rate for at least three years, or at least until there is a lower rate of unemployment and a return to a “tight” labour market.

After deciding to hold the official cash rate at 0.10 per cent in December, Mr Lowe reemphasised that the board would not increase the cash rate until actual inflation was sustainably within the 2 to 3 per cent target range.

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However, the RBA has defied expectations by slashing the official cash rate further to the new record low.

Last year, the RBA commenced quantitative easing (QE) by purchasing government bonds on the secondary market after making an emergency out-of-cycle cash rate cut to 0.25 per cent in March 2020 in response to the economic fallout from the coronavirus pandemic.

It also launched a multi-billion-dollar term funding facility (TFF) to maintain the flow of credit to SMEs.

More to come.

[Related: RBA announces December cash rate decision]

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