Concerns over the economic impact of the coronavirus has led to governments and central banks across the world taking decisive action this month.
This has certainly been the case in Australia, with the Federal Government announcing a massive stimulus package.
But that hasn't been deemed enough and the Reserve Bank of Australia has been tipped to follow the lead of the U.S. Federal Reserve and make an emergency cut to the cash rate this afternoon.
This follows the announcement of an emergency meeting later today and a monetary policy announcement at 14.30 AEDT.
What will the RBA do?
Unfortunately for the net interest margins of Commonwealth Bank of Australia (ASX: CBA) and the rest of the big four, the Reserve Bank is widely expected to cut the cash rate to a record low of 0.25%.
In addition to this, there is speculation that the central bank will also launch its first major quantitative easing program.
According to the AFR, governor Philip Lowe is expected to unveil a $50 billion package targeting four-year government bonds. This is being done in an effort to flood the financial system with extra cash to ensure it keeps running smoothly under the extreme stresses of the coronavirus outbreak.
In response to the speculation, the Australian dollar has crashed lower once again. Overnight the local currency fell as low as 57 U.S. cents. It is currently down 3.4% to just under 58 U.S. cents.
What now?
If the cash rate does go lower, it will almost certainly mean the same for the interest rates on offer with term deposits and savings accounts.
So, if you're looking for a source of income, I would suggest you look at defensive shares like Coles Group Ltd (ASX: COL) and Telstra Corporation Ltd (ASX: TLS) which also offer generous dividend yields.
