Shock and awe budget rate cut to cushion bumpy recovery

Original article by Patrick Commins
The Australian – Page: 1 & 4 : 23-Sep-20

The Reserve Bank of Australia’s deputy governor Guy Debelle has signalled that there could be a further reduction in the cash rate, which fell to a record low of 0.25 per cent in March. The next scheduled meeting of the central bank’s board is on 6 October, when the federal government will also hand down the Budget. National Australia Bank’s chief economist Alan Oster says the cash rate is likely to be reduced to 0.1 per cent on this day or in November. He adds that further cutting the cash rate may not do much to stimulate the economy or create jobs,

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RESERVE BANK OF AUSTRALIA, NATIONAL AUSTRALIA BANK LIMITED – ASX NAB

Fed says rates will stay near zero until 2023

Original article by Nick Timiraos
The Australian – Page: 24 : 18-Sep-20

The US Federal Reserve left interest rates unchanged at its latest policy meeting, with all 17 central bank officials indicating that they expect interest rates to remain at a record low until at least the end of 2021. In addition, 13 of the Federal Reserve officials have indicated that interest rates are likely to remain at close to zero until the end of 2023. Meanwhile, the central bank officials now expect the US unemployment rate to average about 7-8 per cent in the December quarter.

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UNITED STATES. FEDERAL RESERVE BOARD

Fed takes a keen interest in RBA’s bond buying

Original article by Sarah Turner
The Australian Financial Review – Page: 27 : 18-Jun-20

The yield on three-year Australian government bonds has traded within a narrow range of 0.21 per cent to 0.28 per cent since March, when the Reserve Bank commenced a targeted bond-buying program aimed at keeping the yield at around 0.25 per cent. The success of yield curve control in Australia has prompted the US Federal Reserve to assess the strategy, although Stephen Halmarick from the Commonwealth Bank says it is unlikely to adopt this in the near-term. The Federal Reserve’s focus has been on buying a certain amount of bonds each month.

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RESERVE BANK OF AUSTRALIA, UNITED STATES. FEDERAL RESERVE BOARD, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA

Fed to hold interest rates near zero at least till 2022

Original article by Nick Timiraos
The Australian – Page: 17 : 12-Jun-20

The US Federal Reserve has left interest rates on hold after its latest two-day policy meeting, and chairman Jerome Powell has indicated that a rate rise will not be on the agenda for some time. Federal Reserve officials unanimously agreed that the cash rate is likely to remain at around zero in 2021, and the majority expect no change in monetary policy during 2022. Meanwhile, the central bank intends to continue purchasing Treasurys and mortgage securities at the current rate, while Powell says the US labour market is unlikely to rebound from the coronavirus quickly, despite recent data showing that the economy added 2.5 million jobs in May.

CORPORATES
UNITED STATES. FEDERAL RESERVE BOARD

Powell’s equities lift: we’re not out of ammo

Original article by David Rogers
The Australian – Page: 20 : 19-May-20

The Australian sharemarket has been bolstered by encouraging comments from US Federal Reserve chairman Jerome Powell. He indicated that there is "almost no limit" to the central bank’s monetary stimulus in response to the coronavirus pandemic; Powell has also forecast that the US economy will steadily recover during the second half of 2020, in the absence of a second wave of virus infections. The Federal Reserve’s balance sheet has increased by 67 per cent to $US6.93trn since February, although the central bank has been winding back its quantitative easing program since mid-March.

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UNITED STATES. FEDERAL RESERVE BOARD, STANDARD AND POOR’S ASX 200 INDEX

$A doing its job to help stabilise the economy

Original article by Sarah Turner, Jonathan Shapiro
The Australian Financial Review – Page: 31 : 22-Apr-20

The Reserve Bank of Australia has bought $47bn worth of federal and state government bonds since 20 March. The central bank has progressively reduced its daily bond purchases from $5bn to just $500m since then, and it will now buy federal government bonds three times a week and state bonds just once a week. Meanwhile, RBA governor Philip Lowe says the Australian dollar fell more sharply than he had expected in March. It reached a low of $US0.5741 and has since recovered to around $US0.63. Lowe says the currency has been a "great shock-absorber" for the domestic economy over the last three decades.

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RESERVE BANK OF AUSTRALIA

No sign of breakout in inflation: King

Original article by Adam Creighton
The Australian – Page: 13 & 16 : 20-Apr-20

The Reserve Bank of Australia has been actively buying state and federal government bonds in response to the coronavirus crisis. Former Bank of England governor Mervin King contends that the risk of a sharp rise in inflation will remain low if central banks rather than governments continue to have responsibility for deciding how much money to print. King has also described modern monetary theory as "nonsense", while he has praised regulators in Australia, the UK and New Zealand for advising banks to delay their dividend payments.

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RESERVE BANK OF AUSTRALIA, BANK OF ENGLAND

Reserve Bank now important bond player

Original article by Sarah Turner
The Australian Financial Review – Page: 31 : 15-Apr-20

Su-Lin Ong of RBC Capital Markets says the federal government has issued some $48bn worth of bonds so far in 2019-20. She estimates that the Reserve Bank of Australia has bought about $36bn worth of these government bonds in the last three weeks, as part of its quantitative easing program. Westpac’s Damien McColough notes that the central bank has emerged as one of the largest bond fund managers in the local market. Meanwhile, Ong says government bond issuance for 2019-20 could potentially top $160bn.

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RBC CAPITAL MARKETS, RESERVE BANK OF AUSTRALIA, WESTPAC BANKING CORPORATION – ASX WBC

Prepare to be hit but we’ll ease blow: RBA

Original article by Adam Creighton
The Australian – Page: 4 : 8-Apr-20

Reserve Bank of Australia governor Philip Lowe has indicated that the cash rate will remain at 0.25 per cent until inflation returns to its target range of 2-3 per cent and the unemployment rate falls to around 4.5 per cent. The central bank will also maintain its bond-buying program until these targets are achieved. Lowe has warned that the domestic economy faces a "very large economic contraction" due to the coronavirus, while he says the unemployment rate will rise to its highest level in many years. The RBA left the cash rate on hold at its April board meeting.

CORPORATES
RESERVE BANK OF AUSTRALIA

Reserve Bank likely to slow bond buying

Original article by Jonathan Shapiro
The Australian Financial Review – Page: 30 : 7-Apr-20

The Reserve Bank of Australia’s quantitative easing program commenced on 20 March, and the central bank initially began purchasing $5bn worth of commonwealth government bonds per day. It has bought some $31bn of such bonds to date, including $10bn in the week ended 3 April. The RBA has been gradually been winding back its bond buying, and Damien McColough of Westpac says that even if its current momentum is maintained it would hold about $80bn worth of government bonds by the end of June. This would constitute about 30 per cent of the government bonds on issue. The RBA has also bought some $5bn worth of state government bonds.

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RESERVE BANK OF AUSTRALIA, WESTPAC BANKING CORPORATION – ASX WBC