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RBA reveals May cash rate call

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1 minute read

RBA reveals May cash rate call

by Cameron Micallef 05 May 2020 1 minute read

The Reserve Bank of Australia has announced its decision on the official cash rate for May amid speculation the central bank will hold rates despite the fallout from COVID-19.

RBA
May 05, 2020

The central bank acted as most economists predicted, holding the cash rate at 0.25 per cent, having previously stated it was the lower bound for Australian rates.

According to Laing+Simmons managing director Leanne Pilkington, the central bank has already done its part in supporting the economy.

“The Reserve Bank governor recently challenged the government to focus on growth and productivity strategies to help the economy eventually emerge from the COVID-19 crisis. More efficient taxation solutions, including the removal of stamp duty, is an obvious place to start. Interest rates are already rock bottom, and on this score the RBA has done its part.”

What’s next for the cash rate?

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According to AMP Capital chief economist Dr Shane Oliver, Australians should get used to a record-low cash rate for longer, with it likely to take time before the central bank can move again on interest rates.

“The cash rate is as low as it’s going to go, and the next move in rates will be up, but it’s at least three years away, probably more.” 

“The RBA has said on several occasions that it regards 0.25 per cent as the effective lower bound for the cash rate.” 

“Based on the experience of other countries, there is no value in taking rates negative.” 

“So, any further easing in monetary policy will have to come from quantitative easing. In the meantime, the coronavirus-related shutdown will cause a big hit to growth that will take years to fully recover from.” 

“This in turn will mean that it will be many years before we see full employment and inflation in the target range of 2-3 per cent, which in turn will mean rate hikes are many years away.”

RBA reveals May cash rate call
RBA
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About the author

Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your... Read more

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