Reserve Bank of Australia
July 6, 2021
The Reserve Bank of Australia from November will reduced weekly bond purchases from A$ 5 billion currently to A$ 4 billion, and said in a released statement following today’s policy review that “the central scenario remains that the condition for a lift in the cash rate will not be met until 2024.” Forward guidance in previous statements had inserted the qualifying phrase “at least” between the words until and 2024. The Official Cash Rate has been at a record low of 0.1% since a 15-basis point cut last November and twin reductions of 25 bps each in March 2020. The target for the 10-year Aussie sovereign debt yield is also 0.10%.
The statement in comments about Australia’s current economic situation concedes that “we are in a much better position than we thought we would be in” but goes on to observe continuing Covid risks and to say that considerable further progress is needed toward full employment and sustainable inflation within the 2-3% target. Wages are a key policy litmus test that officials want to see rising at more than 3.0% before they raise interest rates. But the tapering of quantitative easing will begin for end-2021 and be be completed before the OCR is hiked.
Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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