Dollar intervention costly and risky: RBA

Cornelia Mascio
Agosto 14, 2020

"I don't think at the moment we would get any traction from making adjustments", Lowe said, before a parliamentary economics committee.

Lowe also flagged high unemployment as a serious concern, with the official jobless figure topping 1 million people for the first time ever as businesses responded to the pandemic.

"If there is any good news to be found here, it is that this decline is not as large as initially feared", he said.

The central bank has indicated it will not increase the cash rate until progress has been made towards full employment and inflation returns to the two to three per cent target.

He says that conditions for a rate rise are not likely to be met for at least three years and that the board's view is that the best course of action is to continue with the current package.

Lowe's comments on negative rates look to have lifted the 10-year yield.

"In a world that is so uncertain and fluid, I don't think it is prudent to rule it out", Dr Lowe said.

The country's central bank chief has warned trying to stimulate the economy by devaluing the Australian dollar would be both costly and risky.

But negative interest rates impaired the profitability and efficiency of the financial system, while also hampering the ability to provide credit.

The Reserve Bank has kept the cash rate at a record low of 0.25 per cent since March and has been buying bonds to maintain liquidity in the market while keeping a lid on interest rates. "I don't think the cost benefit justifies negative interest rates", Dr Lowe said.

Dr Lowe dismissed suggestions the reserve bank should create money to directly finance spending. "There is no way of putting aside the government's budget constraint permanently".

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