FXEMPIRE
All
Ad
Corona Virus
Stay Safe, FollowGuidance
World
99,782,634Confirmed
2,139,214Deaths
71,777,753Recovered
Fetching Location Data…
Advertisement
Advertisement
Bob Mason
The Reserve Bank of Australia Sydney New South Wales Australia

In line with market expectations, the RBA left its cash target rate unchanged at 0.10%, following last month’s cut from 0.25%.

Additionally,

  • Left the target rate for the yield on 3-year Australian Government Bonds at 0.10%.
  • The Board also left the interest rate on new drawings under the Term Funding Facility at 0.1%.
  • Retained the zero interest rate on Exchange Settlement balances.
  • Left the government bond purchasing program unchanged.

The Statement

Salient points from the RBA Rate Statement included:

Global Outlook

  • Globally, the news has been mixed recently. While infection rates have been on the rise in Europe and the U.S, positive vaccine news should support an economic recovery.
  • The economic recovery slowed as a result of the rise in new COVID-19 cases, however.
  • Any recovery is also dependent on ongoing support from both fiscal and monetary policy.
  • Hours worked in most countries remain noticeably below pre-pandemic levels and inflation is low and below central bank targets.
  • Financial conditions remain accommodative globally.
  • While bond yields sit near historic lows, vaccine news has given the equity markets a boost.

Australian Economy

  • The economic recovery is underway and recent data have generally been better than expected.
  • While positive, the Board expects the recovery to be uneven and drawn out.
  • In the RBA’s central scenario, the GDP will not reach 2019 levels until the end of 2021. Forecasts are for the economy to grow by 5% in 2021 and by 4% over 2022.
  • Employment growth was strong in October, though the unemployment rate rose to 7%.
  • The RBA expects a further rise, as firms restructure in response to the COVID-19 pandemic.
  • However, the Board forecasts the unemployment to decline next year and to sit at around 6% at the end of 2022.
  • As a result of excess capacity, wage growth is subdued and will likely remain so in the coming years.
  • The RBA forecasts inflation to be 1% in 2021 and 1.5% in 2022.
  • To date, authorized deposit-taking institutions have drawn down A$84bn under the Term Funding Facility.
  • Over the past month, the Bank has bought A$19bn of government bonds under the purchasing program.
  • Additionally, the bank purchased a further A$5bn of Aussie government securities in support of the 3-year yield target.
  • Monetary and fiscal support will be required for some time. As a result, the Board will not increase the cash rate until actual inflation is sustainably within the 2-3% target range.
  • Wage growth will have to rise materially to support a pickup in inflationary pressures. This will require significant gains in employment and a return to a tight labor market.
  • Based on the outlook, the Board is not expecting to increase the cash rate for at least 3-years.
  • In light of the evolving outlook for jobs and inflation, the Board will continue to review the size of the bond purchase program.

In response to the RBA monetary policy decision, the Aussie Dollar rose to a morning high of $0.73685 before easing back.

At the time of writing, the Aussie Dollar was up by 0.31% to $0.70638.


 

Advertisement
Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Trade With A Regulated Broker

  • Your capital is at risk
IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US