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The Reserve Bank of Australia (RBA) reduced the cash rate by 15bps to 0.10% and said that it planned to buy AUD100 B of 5y-10y bonds over the next 6 months. More than expected, as Prashant Newnaha, Senior Asia-Pacific Rates Strategist at TD Securities, notes. The aussie didn’t move at all because much of this was already priced in.

Key quotes

“RBA cut the target cash rate, the 3yr YCC target and the rate on accessing the TFF to 0.10%. This was largely as expected.” 

“The Bank surprised markets on cutting the rate paid on exchange settlement accounts to 0% and announcing a faster pace of QE purchases of AUD100 B over 6 months in 5-10yr ACGB and semi maturities.” 

“The Bank is upbeat in the near term given data has been better than expected. It has made some material upgrades to GDP and cut the unemployment rate forecast to 6% by Dec’22.” 

“Whether the Bank delivers more stimulus will depend on the unemployment outlook and market functioning over the following six months. If the RBA needs to do more, we believe it has more room to do so.”