RBA left monetary policy unchanged as widely expected, keeping both the cash rate and 3-yr AGS yield target at 0.25%. The central bank also pledged that the “accommodative approach will be maintained as long as it is required”. It “will not increase the cash rate target until progress is being made” on full employment and inflation.
RBA reiterated that the economic downturn is “not as severe as early expected”. However, the recovery is likely to be “both uneven and bumpy” with the coronavirus outbreak in Victoria having a “major effect” on its economy.
In the baseline scenario, output falls by -6% over 2020 then grow 5% in 202. Unemployment rate will hit around 10% later this year due to job losses in Victor. Unemployment rate is expected to gradually decline to around 7% over the following couple of years. Inflation is expected to stay below 2% target over the next couple of years in all scenarios considered.
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