THE Reserve Bank of Australia has cut the cash rate to a record low 0.1 per cent from 0.25 per cent at its monthly board meeting.<\/p>\n
In its first monetary policy easing since March, the board also agreed to similar reductions for other measures to keep market interest rates and funding costs low across the economy.<\/p>\n
“With Australia facing a period of high unemployment, the Reserve Bank is committed to doing what it can to support the creation of jobs,” Reserve Bank governor Philip Lowe said in his post-meeting statement on Tuesday.<\/p>\n
However, he believes the economic recovery is under way in Australia and positive economic growth is now expected in the September quarter, despite the restrictions in Victoria.<\/p>\n
If the rate cut is passed on in full by the banks, the average monthly saving could be around $33 a month on a $400,000 loan for an owner occupier paying principal and interest.<\/p>\n
The central bank also reduced its three-year bond yield target rate and its term funding facility rate for banks to 0.10 per cent from 0.25 per cent.<\/p>\n
The Reserve Bank has also introduced a $100 billion bond program for five to 10-year maturities.<\/p>\n
“The combination of the RBA’s bond purchases and lower interest rates across the yield curve will assist the recovery by; lowering financing costs for borrowers; contributing to a lower exchange rate than otherwise; and supporting asset prices and balance sheets,” Dr Lowe said.<\/p>\n
The reduction in the cash rate is the first since March this year, when it was reduced twice in the month, the second coming at a special board meeting at the onset of the pandemic.<\/p>\n
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