The Central bank of Australia has again left its monetary policy unchanged and decided to continue the purchasing programme for a few more months. This was demonstrated on Tuesday by the Reserve Bank of Australia’s latest interest rate decision.
This means that the bank will continue its bond buyout program after completion of the ongoing program in early September, after which $ 4 billion of bonds will be withdrawn from the market every week until at least mid-February 2022.
With the maintenance of the 10 basis point yield target for the government bond of April 2024, the RBA plans to keep short-term interest rates low and hence the borrowing costs for the state.
The growth of the Australian economy in the quarter through June of this year was 0.7 per cent on a quarterly basis and 10 per cent on an annual basis, a figure that is severely distorted by the consequences of the coronavirus pandemic and the related measures.
The recovery of the economy was also hampered by the outbreak of the so-called Delta variant of the coronavirus and the measures to be taken. The RBA now expects the economy to contract significantly in September, but also that this setback will be temporary in nature.
Unemployment fell below 5 per cent in June, while 5.1 per cent was measured in May. According to the bank, the vacancy rate was at a high level. On the other hand, the policy body expects rising unemployment again in the coming months.
An important parameter for the bank is wage inflation. In the June quarter, the corresponding index was 1.7 percent, a level that the bank is not yet satisfied with.
The RBA reiterated on Tuesday that it will maintain its policy until the level of full employment is reached and inflation is solid between 2 and 3%. The bank’s preliminary estimate is that this will not be the case before 2024. The Australian dollar recorded flatly at 0.7439 US dollars on Tuesday.