As the economy continues to catch up amid the COVID-19 outbreak, an expert thinks the Reserve Bank of Australia (RBA) could lower the rate. target cash rate next month.
Despite expectations that the spot rate will be further reduced this month, the RBA has decided to keep it at its current all-time low of 0.25%.
While the central bank believes that a global economic recovery is underway, it remains to be seen whether its goals are achievable in the short to medium term, said Shane Oliver, chief economist at AMP Capital.
"Our baseline scenario remains that the RBA will reduce the cash rate, the term facility rate and the three-year bond yield target to 0.1% and will now do so at his November meeting after updating his forecast which likely shows his employment and inflation targets still will not be met for the next two years at least, "he said declared.
In its statement, the RBA said it remains committed to doing what it can to support jobs, income and businesses in Australia.
"The RBA Board of Directors will maintain very accommodative policy parameters for as long as necessary and will not increase the cash rate target rate until progress is made towards full employment and he is convinced that inflation will stay in the 2-3% target band for the long term, "the RBA statement read.
Oliver said the RBA statement indicates its "easing bias". He said there was a change in the tone of the RBA, as he had previously said the 0.25% rate was already the "effective lower bound". In its monetary policy decisions prior to this month, the RBA said any further reduction in the cash rate target would not encourage any economic merit.
"We are also seeing it adopt a more traditional quantitative easing program extending bond buying beyond the three-year bond," he said. .
Tim Lawless, head of research at CoreLogic, said low liquidity rates were boosting activity in the housing market, especially on the buyer side.
"Such low interest rate fixation, along with policies to ensure liquidity in financial markets, has been a key factor in sustaining housing market activity and isolating value housing, ”he said.
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