Reserve Bank of Australia February 2021 monetary policy announcement and Governor Lowe's statement

  • The Board decided to maintain the targets of 10 basis points for the cash rate and the yield on the 3-year Australian Government bond,
  • as well as the parameters of the Term Funding Facility.
  • It also decided to purchase an additional $100 billion of bonds

More QE from the RBA but policy rates left untouched (as expected). More QE is significant, the Bank had been expected to announce this, but perhaps at a later date. The extra purchasing will begin in April.

  • says additional purchases will be at the current rate of $5 billion a week
  • additional purchases to start once current bond purchase program is completed in mid-April
  • the decision to extend the bond purchase program will ensure a continuation of this monetary support

Summary Headlines via Reuters

  • will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range
  • says wages growth will have to be materially higher than it is currently
  • says the board does not expect these conditions to be met until 2024 at the earliest
  • says remains committed to maintaining highly supportive monetary conditions until its goals are achieved
  • says given the current outlook for inflation and jobs, this is still some way off
  • economic recovery is well under way and has been stronger than was earlier expected
  • current monetary policy settings are continuing to help the economy by lowering financing costs for borrowers, contributing to a lower exchange rate than otherwise, supporting the supply of credit
  • the central scenario being for GDP to grow by 3½ per cent over both 2021 and 2022
  • says financial conditions remain highly accommodative
  • says GDP is now expected to return to its end-2019 level by the middle of this year
  • housing credit growth to owner-occupiers has picked up recently, but investor and business credit growth remain weak
  • says central scenario is for unemployment to be around 6 per cent at the end of this year and 5½ per cent at the end of 2022
  • exchange rate has appreciated and is in the upper end of the range of recent year
  • inflation and wages growth are expected to pick up, but to do so only gradually
  • board considered upside and downside scenarios related to the virus and the rollout of vaccines
  • disappointing news on the health front would delay the recovery and the expected progress on reducing unemployment
  • possible that further positive health outcomes would boost consumer spending and investment, leading to stronger growth than is currently expected
  • says inflation and wages growth to both remain below 2 per cent over the next couple of years
  • says important near-term issue is how households and businesses adjust to the tapering of some of the covid support measures
  • underlying inflation is expected to be 1¼ per cent over 2021 and 1½ per cent over 2022

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