RBA announces their latest monetary policy decision - 4 August 2020
- Prior 0.25%
- Maintains 0.25% target on 3-year bond yields
- Target will remain in place until progress is made on employment, inflation
- Likely that fiscal, monetary support will be required for some time
- Global outlook remains uncertain
- Central bank remains committed to do what it can to support jobs, businesses
- Central bank will step in tomorrow to resume bond buying
- Further purchases will be undertaken as necessary
- Economy going through a very difficult period
- Central bank's mid-March package is working as expected
- A stronger recovery is possible if progress is made in containing the virus
All in all, there isn't anything too dovish here. They steered slightly away from the previous rhetoric that the economic downturn was "less severe than anticipated" due to the situation in Victoria by saying that a recovery is now underway in "most parts of Australia".
However, they reaffirm that current policy measures are sufficient to deal with that.
They do make mention about stepping back into the bond market tomorrow though:
The yield on 3-year Australian Government Securities (AGS) has been consistent with the target of around 25 basis points. The yield has, however, been a little higher than 25 basis points over recent weeks. Given this, tomorrow the Bank will purchase AGS in the secondary market to ensure that the yield on 3-year bonds remains consistent with the target. Further purchases will be undertaken as necessary.
But I think this is very much a given as long as they feel the need to tinker with the yield curve. Again, their version of QE is all about yield curve control.
Besides that, I don't see much material change and they did not make specific mention about currency levels once again. AUD/USD is little changed at 0.7130 currently.
