Australian Reserve Bank cuts cash rate to 0.25% on Thursday

The raging bushfire turned into a significant blow to the £1 trillion Australian economy towards the end of last year. The Coronavirus pandemic and the associated travel bans and global business disruptions are further pushing the economy down. In its recent attempt to combat the economic impact of Coronavirus, the Reserve Bank of Australia (RBA) resorted to the second rate cut in March on Thursday.

The central bank held an emergency policy meeting on Thursday that resulted in an announcement of the country’s benchmark cash rate reduced to 0.25%. Australian policymakers also saw it fit to launch quantitative easing for the very 1^st time in Australia in order to tackle the Coronavirus pandemic.

Australia’s Cash Rate Is Currently At A Historic Low

At 0.25%, the cash rate marks the lowest it has even been in Australia in history. The RBA also highlighted that the policy will remain lenient until the inflation and employment goals are hit. The central bank also set a 0.25% target for the yield on Australian government bonds (3 years). The Reserve Bank is expected to expand secondary market purchases from Friday in pursuit of the aforementioned target.

With Coronavirus threatening to push the global economy into recession, governments, central banks, and regulators from across the globe are coming together and taking an aggressive stance to minimize its impact.

The U.S Federal Reserve, for instance, resorted to the second emergency rate (100 basis points) in the past week to offer support to the world’s largest economy. The U.S Fed also announced plans of adding over £870 billion stimulus via asset purchases to add liquidity. Multiple other central banks are following in its footsteps in their economic battle against the flu-like virus.

Response In The Forex Market

The Coronavirus has so far infected over 2,20,000 people worldwide and caused close to 9,000 deaths. Many countries like Italy have ordered a nationwide lockdown to contain the spread of the virus.

The forex market remained largely volatile in the past few days. The Aussie dollar dropped to 0.5509 against the greenback on Thursday morning. Following the announcement of the rate cut, however, it gained traction and recovered all of its losses to trade at 0.5790 against the U.S dollar. At the time of writing, the currency pair is exchanging hands at 0.5729.

The U.S dollar index, on the other hand, surged to 101.75 on Thursday. The index has dropped slightly back to 101.33 at the moment.