Reserve Bank protects flow of cheap credit

·1-min read

MONETARY POLICY DECISIONS:

* Official cash rate unchanged at 0.1 per cent

* Three-year bond target unchanged at 0.1 per cent

* Economic recovery in Australia stronger than earlier expected and forecast to continue

* But inflation and wage outcomes remain subdued

* No cash rate rise until inflation is in the two to three per cent target range, which is not expected before 2024

* To meet the inflation target, the labour market must be tight enough to generate wages materially higher than it is currently

* Inflation set for spike to 3.5 per cent over the year to June but expected to be 1.5 per cent over 2021 and two per cent by mid-2023

* Reserve Bank remains committed to full employment and inflation target, requiring both to be met for any rate rise

* Bank carefully monitoring trends in housing borrowing with prices rising in all markets

* Board notes pick-up in housing demand from investors and wants lending standards maintained

* Bond purchase program playing an important role in supporting Australian economy

* Retains April 2024 bond for the yield target, not rolling it over to November 2024

* Will continue buying government bonds after completion of existing program in September

* Government bond purchases will be $4 billion a week until at least mid-November

* Next bond program review set for November, allowing an adjustment to stronger economic conditions

* Now closed Term Funding Facility expected to support low borrowing costs until mid-2024

* For providers of payments services, rate on exchange settlement balances unchanged at zero per cent

(Source: Reserve Bank of Australia)

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