Last night, in a much anticipated speech broadcast live on the Reserve Bank’s website, Governor Phil Lowe laid out in very clear terms the circumstances in which the bank would resort to quantitative easing and the way in which it would implement it.
Quantitative easing is simply a change in the way it eases monetary policy when the official interest rate approaches zero.
Eight years ago the cash rate was 4.5%. Three years ago it was 1.5%. After the most recent three cuts in June, July and October, it is just 0.75%
- ^ broadcast live on the Reserve Bank’s website (webcasting.boardroom.media)
- ^ cash rate (www.rba.gov.au)
- ^ Source: RBA (www.rba.gov.au)
- ^ effective lower bound was 0.25% (www.rba.gov.au)
- ^ Below zero is ‘reverse’. How the Reserve Bank would make quantitative easing work (theconversation.com)
- ^ RBA update: Governor Lowe points to even lower rates (theconversation.com)
- ^ research (www.ussc.edu.au)
Authors: Stephen Kirchner, Program Director, Trade and Investment, United States Studies Centre, University of Sydney