(Adds comment from Governor Lowe, context, background)
By Swati Pandey
SYDNEY, Aug 14 (Reuters) – Australia’s central bank has not ruled out a separate bond buying programme or other adjustments to its suite of policy measures, although the “best course of action” is to continue with its current package, Governor Philip Lowe said on Friday.
The Reserve Bank of Australia (RBA) cut its cash rate to a record low 0.25% in an emergency meeting in mid-March and launched an “unlimited” bond buying programme under which it has purchased around A$55 billion of government securities.
It also flushed the banking system with liquidity and offered term funding to the country’s lenders in an effort to blunt the blow to the economy from the coronavirus pandemic.
Responding to questions before a parliamentary economics committee on Friday, Governor Philip Lowe said while it has not exhausted its options, there are limits to what monetary policy can reasonably do.
“We could make some adjustments to the package we introduced in March. I don’t think at the moment we would get any traction from making adjustments,” Lowe said.
The RBA Board has given a clear signal it will not increase the cash rate until progress is made towards achieving its employment and inflation goals.
“The main game is going to be fiscal and structural policies, that’s the reality we face,” Lowe added.
He noted an expected increase in public debt from fiscal stimulus was “entirely manageable and affordable.”
“It is the right thing to do to borrow today to help people, keep them in jobs and boost public investment at a time when private investment is very weak,” Lowe said.
Last week, the RBA downgraded its outlook for the economy and warned unemployment would stay high for several years with the second-most populous state of Victoria battling a fresh wave of coronavirus infections.
Australia is facing its deepest contraction in about a century because of the COVID-19 pandemic though the economic shock has been less severe than first forecast. (Reporting by Swati Pandey; Editing by Tom Hogue and Sam Holmes)
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