RBA rules out another interest rate cut

THE Reserve Bank says it is not considering further interest rate cuts but is prepared to increase its $100b government bond buying program.

In its quarterly statement on monetary policy for November, the central bank said its most recent measures – cutting the cash rate to 0.1 per cent and launching quantitative easing – will support economic growth. It will do this by making lending cheaper, lowering the value of the Australian dollar – making our exports cheaper – and giving borrowers more spare cash, the RBA said.

But after slashing the official cash rate to a new record low on Tuesday, the RBA said it was not contemplating a further cut.

It has also ruled out negative interest rates, where banks are charged to store their money with the central bank in order to push them to lend it out.

“Interest rates have been lowered as far as it makes sense to do so in the current environment,” the RBA said in its latest update.

“The board considers that there is little to be gained from short-term interest rates moving into negative territory and continues to view a negative policy rate as extraordinarily unlikely.”

Instead, the RBA will focus on its bond buying program which aims to push down long-term government bond yields and the Australian dollar.

“If the circumstances require, the (RBA) board is prepared to do more and undertake additional (government bond) purchases,” it said.