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RBA reveals cash rate decision for October

The central bank’s board has announced its monetary policy decision amid speculation of a cut to the cash rate.

The Reserve Bank of Australia (RBA) has held the official cash rate at 0.25 per cent, despite speculation of an adjustment.  

Economists had touted the possibility of a cut to the cash rate to complement fiscal stimulus expected to be announced in this evening’s federal budget.

This followed remarks from deputy governor of the RBA governor Guy Debelle, who conceded that further cuts to the cash rate were “possible” as a means to accelerating the economic recovery from the COVID-19 crisis.

Mr Debelle’s remarks were perceived by Westpac chief economist Bill Evans as a “clear hint” that the central bank was preparing to adjust its monetary policy settings.

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However, Mr Evans revised his forecasts ahead of the RBA’s cash rate announcement, claiming that a cut could divert attention from the budget.

“A central bank moving on budget day could be interpreted by the government and the bank itself as diverting attention away from the budget and complicating the government’s task in ‘selling’ the budget,” he said.

As such, Mr Evans now expects the central bank to delay changes until 3 November, providing the government with enough time to promote its fiscal policy agenda without monetary policy distractions. 

According to Mr Evans, the RBA is set to cut the overnight cash rate from 25 bps to 10 bps while also adopting a 10np three-year bond target and adjusting the rate on new drawdowns of the term funding facility to 10 bps.

Mr Evans also expects the central bank to reduce the rate paid on exchange settlement account (ESA) balances from 10 bps to 1 bp, creating a “significant incentive” for ESA holders to purchase bonds.

[Related: RBA rate cut imminent, says Westpac, NAB]

RBA reveals cash rate decision for October
RBA reveals cash rate decision ahead of budget
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Charbel Kadib

Charbel Kadib is the news editor on the mortgages titles at Momentum Media.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

You can email Charbel on: This email address is being protected from spambots. You need JavaScript enabled to view it.

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