Australia central bank seen cutting rates, expanding bond buying in November

Sydney

AUSTRALIA'S central bank is expected to cut key rates to a historic low of 0.1 per cent at its monthly policy meeting next month, a majority of economists polled by Reuters showed, as it looks to boost jobs and economic growth.

As many as 21 of the 25 surveyed, or 84 per cent, expect a 15 basis point cut to 0.10 per cent at the Reserve Bank of Australia's (RBA) Nov 3 board meeting. One economist predicted a 10 basis point cut to 0.15 per cent while the remainder forecast no change.

Analysts also predict the RBA would expand its government bond-buying programme.

"We now think that a proper Quantitative Easing (QE) is simply a matter of time and we would not rule out a near-term announcement," said RBC Capital Markets economist Su-Lin Ong.

ANZ economists expect a A$100 billion (S$96.5 billion) of QE, targeting Australian government bonds with maturities between five and 10 years. "This number, combined with the bond purchases it has already done, would be consistent with the size of the initial QE programmes of other central banks," the economists said.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

The RBA had, in March, cut the cash rate to 0.25 per cent and launched an unlimited bond-buying programme to depress three-year bond yields in a bid to shield the blow to the country's economy from the coronavirus. It has so far bought over A$60 billion of government bonds.

The RBA has left the rate unchanged since March, though in September it expanded its cheap funding facility for banks to ensure borrowing costs remained low.

In a shift in stance, governor Philip Lowe last week signalled the door was ajar for further easing in monetary policy while adding that the RBA board was considering whether to expand its quantitative easing programme to include bonds with maturities beyond three years.

The remarks prompted analysts to predict a rate cut in November. REUTERS