The RBA Slashed Interest Rates, Now What For AUD?

Overnight the Reserve Bank of Australia (RBA) cut its benchmark interest rate to a record low, marking the first central bank to ease policy since the threat of Coronavirus started to take shape.

The move from the central bank was the fourth reduction in rates within less than a year, bringing the cash rate to 0.5%, as there were growing signs that the Australian economy was further stalling.

During a post-meeting statement, Governor Philip Lowe said the coronavirus epidemic was having a “significant” hit on Australia’s economy and that it was difficult to predict how large and long-lasting the effects will be.

The board of the RBA has left the door open to further potential action, but nothing so much as imminent. They noted “will continue to monitor developments closely and assess the implications of the coronavirus for the economy. The Board is prepared to ease monetary policy further to support the Australian economy.”

What does this mean for AUD?

The Australian Dollar (AUD) did jump immediately on the announcement, following the 25BPS rate cut. It gained as the markets had already priced in this action from the central bank. The move from them was very much a neutral cut, they did not suggest rates will be cut immediately again, however, left the door open to action if needed.


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