RBA: Rate Cuts Are Not Off The Table, and ‘QE Is a Policy Option in Australia’

• The RBA has been saying all year that the next move in official interest rates is likely to be up.
• The central bank’s deputy governor used a speech in Sydney to clarify that the bank will still cut rates if required — and that it is also prepared to use quantitative easing in a crisis.
• This week consensus around the future direction of interest rates among economists started to fracture.

One of Australia’s most senior central bankers has made it clear that official interest rate cuts are still an option if required by economic conditions, adding that unconventional monetary policy tools used in other parts of the world to deal with the GFC would be an option for Australia in a crisis.

Reserve Bank of Australia (RBA) deputy governor Guy Debelle used a speech in Sydney to say there is “still scope for further reductions in the policy rate” from its current record low of 1.5%.

Debelle said the lessons of central banks’ responses during the GFC were to “go fast and go hard. Don’t die wondering”, as he canvassed Australia’s policy options for dealing with a severe downturn.

Debelle said that quantitative easing, or QE as it’s known, could be deployed by the central bank to deal with a crisis in financial markets.

Sourec: Reserve Bank of Australia (RBA)