RBA March 18 meeting (the emergency meeting) minutes

Author: Eamonn Sheridan | Category: Central Banks

Reserve Bank of Australia monetary policy meeting minutes 

  • members had no appetite for negative interest rates in Australia
  • members agreed that the cash rate was now at its effective lower bound
These two points important for what is yet to come from the RBA. Indeed we've already seen them implementing their QE program. 

More headline points:
  • members noted that some time might be needed before yields would fall to the target from their level over the weeks preceding the meeting - of around 45 basis points.
  •  members noted that focus of the program would be on bond yields rather than the quantity and timing of bond purchases.
  • objective of this component of the proposed policy measures would be to add to the downward pressure on funding costs for financial institutions, households and businesses
  • members thought it likely that the target for three-year yields would be maintained until progress was made towards the bank's goals of full employment and the inflation target
  • members expressed the view that it would be appropriate to remove the yield target before the cash rate itself was raised
  • members noted that any further widening in spreads would translate directly into higher borrowing costs
  • government bond markets had displayed signs of dysfunction, with many participants seeking to liquidate their portfolios
  • immediate outlook for Australian and global economies was highly uncertain
  • says members viewed it as very likely that most countries would experience a very sharp contraction in economic activity
  • members acknowledged that the term funding scheme and the three-year bond yield target were both significant policy developments
  • members strongly supported the proposed policy response as a comprehensive package
  • important to emphasise that the bank expected a recovery once the covid-19 outbreak has been contained
  • increase in ES balances would be likely to change the way that the cash market operates
  • large increases in ES balances could result in the cash rate drifting below the target

I bolded that 'comprehensive package' point. Since the meeting the Aust. government has committed to a big fiscal support package. I'd suspect now the RBA is content to hold the cash rate where it is and continue with their QE program as they assess the months ahead and how the fiscal efforts will impact on the economic fallout of the virus outbreak. Like all of us they'll have an eye on how the health authorities are responding to contain the infection spread also. Messaging in the past day or so from these folks are showing glimmers of a less pessimistic outlook. This can, of course, change. 

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