RBA: 0.25% likely to be the effective lower bound for its cash rate – ANZ

Sandeep Kanihama FXStreet Contributor

ANZ analysts point out that the RBA views 0.25% as the effective lower bound for its cash rate.

Key Quotes

“If the RBA retains its aversion to negative rates, then reducing the cash rate below 0.25% while maintaining the floor of 0% on its rate setting corridor could lead to a counterproductive tightening in monetary conditions, unless it were accompanied by quantitative easing (QE).”

“If the RBA were to adopt QE after the cash rate reaches 0.25%, there could be volatility in how much money banks hold at the RBA. This could see the cash rate fluctuate between 0 and 0.25%.”

“We will focus on the mechanics of how the RBA implements monetary policy and how this could change once 0.25% is reached and QE is implemented.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

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