Cash rate cut to record low

The RBA has decided to cut rates to 0.25%

RBA Cuts Cash Rate To 0.25%

The Reserve Bank of Australia (RBA) has cut the official cash rate to a fresh historic low of 0.25% in an effort to soften the economic blow of the COVID-19 pandemic. Usually the RBA meets on the first Tuesday of every month but this emergency gathering was announced earlier in the week in response to what has been happening.

 

It is the first time a rate cut has been announced outside of a regular meeting since 1997. Governor Philip Lowe announced the rate cut along with other measures which included quantitative easing, which is designed to make sure credit remains available to individuals and businesses. Included in these measures is a $90 billion lending facility to banks for small business along with the purchase of government bonds.

 

The setting up of the $90 billion lending facility to assist small businesses and help banks with their own margin pressures is similar to what was announced by the Bank of England last week. This scheme will be complimented by the Morrison governments new pledge of $15 billion to enable smaller lenders to continue supporting Australian consumers and small business.

 

Below are some quotes from Governor Lowe:

 

“The various elements of this package reinforce one another and will help to lower funding costs across the economy and support the provision of credit, especially to small and medium-sized businesses.”

 

“Australia’s financial system is resilient and well placed to deal with the effects of the Coronavirus. The banking system is well capitalised and is in a strong liquidity position. Substantial financial buffers are available to be drawn down if required to support the economy.”

 

Read the statement here: https://www.rba.gov.au/media-releases/2020/mr-20-08.html