RBA cuts rates to near zero

Australia's central bank trimmed interest rates to near zero and ramped up its bond-buying plans in a much-needed salve to aid economic recovery from the country's worst downturn in a generation.The Reserve Bank of Australia (RBA) said it would buy A$100 billion (US$70.4 billion) of government bonds with maturities of around five to 10 years over the next six months, a more aggressive pace than some had expected.The RBA also cut its target for three-year bond yields to 0.1%, from 0.25%, to align with the cash rate, which, it pledged will remain unchanged for at least three years.The move nudged the local dollar down to US$0.7042, while yields on bonds out to five years all hit historic lows.“Today's decision reflects the Reserve Bank's commitment to do what we reasonably can, with the tools that we have, to support the recovery of the Australian economy,” Governor Philip Lowe said in a speech in Sydney.“The Board views addressing the high rate of unemployment as a national priority and it wants to do what it can to support job creation.”RecessionThe central bank did nudge up forecasts for economic growth to take account of the country's success in containing the coronavirus, Lowe bluntly dismissed talk the recession was over.“I don't know how anyone concluded that we're not in recession,” said Lowe, referring to recent media reports that the recession had ended. “On any reasonable definition we're in a recession.”Australia's A$2 trillion (US$1.41 trillion) economy was hit hard as the coronavirus pandemic forced businesses to down shutters, leaving hundreds of thousands without work.The jobless rate is hovering near 7%, having risen from around 5% before the Covid-19 pandemic. Economists say the actual level of unemployment would be even higher if those on government support are included.Australia's conservative government has unleashed A$300 billion in emergency stimulus to prop up growth this year, including A$17.8 billion in personal tax cuts.The RBA has welcomed the fiscal largesse, some critics have said the government's tax cuts weren't the best way to spur consumer spending.– Nampa/Reuters

RBA cuts rates to near zero

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RBA cuts rates to near zero

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