Reserve Bank of Australia monetary policy decisions.
- cash rate at 0.1%
- 3-year bond yield target at 0.1%
- to expand government bond buying programme by A$100 bln
- to buy government bonds of 5 to 10 years maturity
- will buy bonds issued by the Australian government and by the states and territories, with an expected 80/20 split
- reduces the interest rate on new drawings under the term funding facility to 0.1 per cent
- the purchase of $100 bln of 5-10 yr govt bonds will be over the next six months
- ESA cut to zero
- RBA says do not expect to raise the cash rate for at least three years
- says decided on a package of further measures to support job creation and the recovery of the Australian economy from the pandemic
- is prepared to do more if necessary.
- says package includes the purchase of $100 billion of government bonds of maturities of around 5 to 10 years over the next six months
- says under the program to purchase longer-dated bonds, the bank will buy bonds issued by the Australian government and by the states and territories
- says monetary and fiscal support will be required for some time
- says bonds will be bought in the secondary market through regular auctions, with the first auction to be held this Thursday
- the bank remains prepared to purchase bonds in whatever quantity is required to achieve the 3-year yield target
- wages growth will have to be materially higher than it is currently to reach inflation target
- says any bonds purchased to support 3-yr target would be in addition to the $100 billion bond purchase program
- to keep the size of the bond purchase program under review
- positive GDP growth is now expected in the September quarter, despite the restrictions in Victoria
- says in the central scenario, GDP growth is expected to be around 6 per cent over the year to June 2021 and 4 per cent in 2022
- it will take some time to reach the pre-pandemic level of output
- unemployment rate is expected to remain high, but to peak at a little below 8%
- lower interest rates across the yield curve will contribute to a lower exchange rate than otherwise
- at the end of 2022, the unemployment rate is forecast to be around 6%
- this extended period of high unemployment and excess capacity is expected to result in subdued increases in wages and prices over coming years
- in underlying terms, inflation is forecast to be 1 per cent in 2021 and 1½ per cent in 2022
I bolded a few of those main points (via Reuters) above
On the Australian dollar the RBA says the policy actions today will contribute to a lower exchange rate
Full text of Lowe's statement:
If you are after background on this, earlier posts:
- There will be policy changes from the RBA today
- RBA monetary policy meeting Tuesday 3 November 2020 - preview
- RBA November monetary policy meeting decision due Tuesday 3rd - preview
- ANZ preview the RBA meeting on November 3 - rate cut and more
- ING make "The case against a rate cut" from the Reserve Bank of Australia
- preview link here.
- And another preview here