Reserve Bank primed for out-of-cycle emergency interest rate cut

The RBA will announce an emergency rate cut to 0.25 per cent and launch a program to directly intervene in the bond market.

Governor of the Reserve Bank of Australia Philip Lowe. Picture: AFP

The Reserve Bank will announce an emergency rate cut to 0.25 per cent this afternoon and launch a program to directly intervene in the bond market as policymakers scramble to cushion the devastating economic impact of the coronavirus pandemic.

RBA governor Philip Lowe will issue a statement at 2:30pm, AEDT, ahead of a speech at 4pm.

It will be the first time since July 1997 that the RBA has moved its key cash rate target outside of the monthly schedule. The next meeting of the board due April 7.

Central banks around the world have taken extraordinary measures in recent days to slash key rates and pump money into economies in order to fend off a potentially devastating economic downturn.

The European Central Bank was the latest, launching an additional emergency bond-buying program worth €750 billion ($1.4 trillion).

“There are no limits to our commitment to the euro,” ECB president Christine Lagarde said.

Despite these measures, joined by promises of massive fiscal support from policymakers, financial markets continue to crash.

“Policymakers around the world are doing what they can, but it is unclear whether that is enough in economies that are likely to be in lockdown for an unknown number of months,” NAB economist Tapas Strickland said.

Wall Street plunged by more than 8 per cent again overnight, bringing the total losses to 30 per cent since February’s peak, in line with losses on the ASX, which has managed to push 0.3 per cent higher to 4697 points this morning. Investors dumped the Australian dollar overnight despite the widely anticipated actions from the RBA this afternoon, as markets ratcheted higher the chance of a global recession. The Aussie fell 3 per cent to trade at US57.92 cents this morning, its lowest in over 17 years.