The Governing Council of the Reserve Bank of Australia decided to keep the interest rate in the country unchanged at 0.25 per cent during its April monetary meeting. The near negative interest rate was implemented at an emergency meeting last month.
As we argued in our weekly expectations update from earlier this week, the Bank would have to remain accommodative to the struggling economy at least for as long as the coronavirus crisis continues to affect it negatively.
In its post-decision monetary policy statement, the Council presented its outlook on the current economic developments in Australia and the world.
"Financial market volatility has been historically high, and many markets around the world have been dislocated. There are, however, some signs that markets are working more effectively than they were a few weeks ago. This improvement partly reflects the substantial measures undertaken by central banks."
The RBA also outlined the necessary conditions, which need to be observed before the Bank starts tightening its monetary policy, and reducing the amount of government debt it’s currently purchasing.
“The Bank has injected substantial liquidity into the financial system through its daily open market operations to support credit and maintain low funding costs in the economy. It will continue to ensure that the financial system has sufficient liquidity. Given the substantial liquidity that is already in the system and the commencement of the Term Funding Facility, the daily open market operations are likely to be on a smaller scale in the near term. Operations at longer terms will continue, but the frequency of these operations will be adjusted as necessary according to market conditions.”
Meanwhile, the rally on the Australian dollar, which was initiated after the Bank announced the release of its relief package in early March, maybe coming to an end.
The AUDUSD has started to consolidate just below the major resistance level at 0.62000 and appears incapable of breaking out above it. A new bearish correction below 0.60000 might be due soon.
AUDUSD 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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