The RBA cut its official cash rate target from 0.75% to 0.50% at its March meeting. The idea the RBA would move at its March meeting took a hold of traders in the domestic cash market at the end of the previous week. At that time, March contracts had implied only an 18% chance of a rate move but a day before that, it had been zero. After the weekend, on the day before the RBA meeting, this probability moved to 100%.
The minutes of the March meeting have now been released and the board’s deliberations focussed on the novel coronavirus, its effects on markets in the latter part of February and the responses of central banks. They noted “it was becoming increasingly clear that COVID-19 would cause major disruption to economic activity around the world.”
While the minutes went through its familiar format of discussing international and domestic economic conditions, there was little discussion in these sections without some reference to the economic impact of the coronavirus. The RBA Board concluded “the outbreak would have a significant effect on the Australian economy.”
Bill Evans, Westpac’s chief economist said the minutes had largely been overtaken by events of the past few weeks. “Since the Board meeting, the RBA has announced a series of initiatives to boost liquidity in the financial markets. “ He was referring to an expansion of the RBA’s repurchase facility and its announcement of its intention to enter the secondary market for government bonds should it feel it necessary.