RBA’s Kent says central bank will be better prepared to handle next crisis

Reserve Bank of Australia (RBA) Assistant Governor Chris Kent said during a review of alternative monetary policy tools that the central bank will be better prepared to respond to the next crisis it faces, Bloomberg reported on Monday.

Key quotes

The cash rate target remains our primary and preferred instrument.

Additional tools can play an important role during extraordinary times and provide some extra support, but they are more complex and carry greater risks.

In those circumstances, it may consider responding earlier and more decisively to disinflationary shocks by pre-emptively lowering the cash rate target.

In short, the most important support during the pandemic came from lowering the cash rate to historically low levels and keeping it there.

Additional tools can reinforce that support, but their effects – beyond addressing severe market strains – are likely to be more marginal and their risks need to be managed carefully.

Market reaction

At press time, the GBP/USD pair trades 0.12% lower at around 0.6886.