The Reserve Bank of Australia (RBA) left interest rates unchanged at 0.25% on Tuesday 4 August. The market was afraid to cut rates to 0.1% at some point, which did not happen, and the Australian dollar rose slightly.
Instead of lowering interest rates, the RBA decided on a new round of bond purchases, which it will start already on Wednesday. This is due to the recent increase in Australian debt rates above the levels set by the central bank. In this way, the RBA is putting the Australian government's bond yields under control, intervening with a buy if necessary. According to the decision-makers, most of the country is going into a phase of recovery, which, however, will not be evenly distributed, as the renewed epidemic in the state of Victoria may have a major impact on the Australian economy.
The RBA has declared that it will maintain its interest rate target at current levels until progress towards full employment is made and until policymakers see that inflation will remain permanently within the 2-3 percent target.
The threat of renewed restrictions
The coronavirus epidemic is still accelerating in some countries, including Poland, where 680 new COVID-19 cases have already been reported in one day. In the world, the number of people infected with the coronavirus has exceeded 18.2 million.
In the USA, the epicenter of this disease, the number of infections has increased in the last 24 hours by 45.3 thousand people, to nearly 4.71 million. Brazil reported 8,000 16,6 new cases to 2,75 million and India 50,400 to 1,85 million. The progress of the epidemic may cause increasing uncertainty in the markets as further restrictions are more likely to be imposed.
Wall Street record and delayed stimulus package
On the stock market in Europe, we observe a potential withdrawal from the poor performance of companies such as Diageo and Bayer. BP, in turn, reduced its dividend but promised to buy back its own shares.
Wall Street stock market investors are celebrating further Nasdaq 100 records in anticipation of the new fiscal stimulus package that was supposed to appear two weeks ago. The patience of investors and US citizens is put to the test, but it could probably be rewarded.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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