Australia central bank seen cutting rates, expanding bond buying in November

(Reuters) – Australia’s central bank is expected to cut key rates to a historic low of 0.1% at its monthly policy meeting next month, a majority of economists polled by Reuters showed, as it looks to boost jobs and economic growth.

As many as 21 of the 25 surveyed, or 84%, expect a 15 basis point cut to 0.10% at the Reserve Bank of Australia’s (RBA) Nov. 3 board meeting. One economist predicted a 10 basis point cut to 0.15% while the remainder forecast no change.

Analysts also predict the RBA would expand its government bond-buying programme.

“We now think that a proper Quantitative Easing (QE) is simply a matter of time and we would not rule out a near-term announcement,” said RBC economist Su-Lin Ong.

ANZ economists expect a A$100 billion of QE, targeting Australian government bonds with maturities between five and ten years.

“This number, combined with the bond purchases it has already done, would be consistent with the size of the initial QE programs of other central banks,” the economists said.

The RBA had, in March, cut the cash rate to 0.25% and launched an unlimited bond buying programme to depress three-year bond yields in a bid to shield the blow to the country’s economy from the coronavirus.

It has so far bought over A$60 billion ($42.52 billion) of government bonds.

The RBA has left the rate unchanged since March, though in September expanded its cheap funding facility for banks to ensure borrowing costs remained low.

In a shift in stance, Governor Philip Lowe last week signalled the door was ajar for further easing in monetary policy while adding the RBA board was considering whether to expand its quantitative easing programme to include bonds with maturities beyond three years.

The remarks prompted analysts to predict a rate cut in November, sparking a rally in government bonds AU3YT=RRAU10YT=RR and sending the Aussie dollar AUD=D3 to a two-week trough of $0.7056.