The RBA has hinted that July will see the start of a normalisation of monetary policy. But there’ll still be no interest rate rises for years.
The Reserve Bank of Australia (RBA) has dropped a big hint that it will be winding back the pace of its $100 billion of quantitative easing program at its next board meeting in July, signalling a slow normalisation of monetary policy.
The July board meeting will decide if the target month for bond purchases to maintain the current 0.10% rate of April 2024 should be maintained or whether the three-year bond maturing in November of the same year should become the target. April would indicate the RBA still believes that unemployment will fall sufficiently by then to boost wages and lift inflation “sustainably” into the 2%-3% target range. Switching to November would indicate the bank does not think that will happen and more time is needed — an outcome that would damage its monetary policy standing and do no favours for the Morrison government’s current election stance.
The omission from yesterday’s post-meeting statement of a phrase from the May statement gives a hint that April remains the target. The phrase dropped was “the board is prepared to undertake further bond purchases to assist with progress towards the goals of full employment and inflation”.
Read more about the RBA’s projections…
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