Tuesday, October 20, 2020

RBA Has Given Clear Instructions, Trader Ready!

 The main focus of today's Asian session was on the publication of a minutes report by the Reserve Bank of Australia (RBA) after the central bank maintained unchanged interest rates at a policy meeting earlier this month.

According to published reports, RBA committee members have discussed the possibility of further monetary policy easing, including reducing interest rates and towards zero and extending longer government bond purchases.

Further easing is said to help reduce the risk of financial stability by strengthening the balance sheet of the economy and the private sector, thus lowering the amount of non-performing loans.

Meanwhile, the RBA committee also discussed the implications for the Australian dollar exchange rate, giving clear indications that the central bank may cut interest rates and expand bond purchase programs to lower borrowing costs and currency values.

In addition, the RBA also stated that the recovery may be slow and uneven, while inflation is expected to slow for some time. Unemployment is also forecast to remain high for the long term.

Accordingly, the central bank considers that fiscal and monetary support are needed for some time.

In a separate statement issued prior to the publication of the minutes of the meeting, RBA Assistant Governor Chris Kent said that one of the options for monetary instruments is the purchase of bonds further than the yield curve.

The Aussie dollar depreciated lower following the release of the RBA meeting minutes report which further strengthened market expectations that the central bank would lower interest rates at next month's policy meeting.