RBA holds cash rate at 0.25%

The Reserve Bank of Australia (RBA) has decided to keep the official cash rate amid calls for it to move into negative territory.

The decision on Tuesday to maintain the 0.25 per cent settings - put in plan an unscheduled meeting in late March - was widely forecast by economists and the market.

While Governor Philip Lowe noted the economy was going through a difficult period because of the coronavirus pandemic, the bank's statement struck a more upbeat tone than the previous one.

"Notwithstanding these developments, it is possible that the depth of the downturn will be less than earlier expected," it said.

"The rate of new infections has declined significantly and some restrictions have been eased earlier than was previously thought likely. And there are signs that hours worked stabilised in early May, after the earlier very sharp decline. There has also been a pick-up in some forms of consumer spending.

"However, the outlook, including the nature and speed of the expected recovery, remains highly uncertain and the pandemic is likely to have long-lasting effects on the economy."

The Australian dollar breached the US68¢ level overnight. While an appreciating Australian dollar has previously been of concern to the central bank, it has refrained from offering commentary on the currency of late.

The Reserve Bank has also strongly resisted any suggestions that it would consider a negative interest rate policy.

Last week Dr Lowe told the Senate the economy was tracking better than its baseline scenario but that even the upside scenario was "pretty depressing" with unemployment likely to remain low.

Source: https://www.afr.com/policy/economy/rba-holds-cash-rate-at-0-25pc-20200602-p54yo0

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