Read the Beforeitsnews.com story here. Advertise at Before It's News here.
Profile image
By CentralBankNews.info (Reporter)
Contributor profile | More stories
Story Views
Now:
Last hour:
Last 24 hours:
Total:

Australia holds rate, extends bond purchases 3 months

% of readers think this story is Fact. Add your two cents.


     Australia’s central bank left its main interest rate steady but extended its current purchases of government bonds by another three months, saying this “reflects the delay in the economic recovery and the increased uncertainty associated with the Delta outbreak.”
     The Reserve Bank of Australia (RBA) left its target for the cash rate at 0.10 percent, unchanged since November 2020 when it was lowered for the third time last year during the COVID-19 pandemic.
     The bank also confirmed its guidance that it will not raise the rate until inflation is sustainably within its target range of 2 to 3 percent, a condition it doesn’t expect to be met before 2024.
      In addition to cutting the rate last year to cushion economic activity, RBA also began targeting a yield on a benchmark government bond and buying government bonds to ensure longer-term interest rates remained low, reinforcing its easy monetary policy.
     But reflecting a faster-than-expected recovery of the economy in the first half of this year, RBA in July began rolling back some its crises measures.
     This included keeping the April 2020 government bond as its target bond for a 0.10 percent yield and trimming its weekly purchases of bonds to $4 billion from $5 billion in early September. 
     The pace of $4 billion of bond purchases would then continue until at least mid-November when the RBA board would review this pace.
     But the spread of the Delta variant of the coronavirus in June triggered widespread lockdowns.
    “The recovery in the Australian economy, has, however, been interrupted by the Delta outbreak and the associated restrictions on activity,” RBA said, extending its purchases of bonds at a weekly rate of $4 billion until at least mid-February next year.
     RBA expects the latest wave of the virus to temporarily lead to a material decline in gross domestic product in the third quarter and boost unemployment.
     But as vaccinations continue to rise and restrictions then again ease, RBA expects the economy to bounce back though there is uncertainty over the timing and pace of this and the recovery is likely slower than at the start of this year.
     ”The Delta outbreak is expected to delay, but not derail, the recovery,” RBA said, expecting the economy to again expand in the fourth quarter and return to pre-Delta path in the second half of 2022.
     As in recent months, the RBA said it was committed to “maintaining highly supportive monetary conditions to achieve a return to full employment in Australia and inflation consistent with its target,” adding it would continue to review its bond purchasing program.
     Australia’s inflation rate jumped to 3.8 percent in the second quarter from 1.1 percent in the first quarter for the highest rate since the third quarter of 2008 while its GDP grew an annual 9.60 percent in the same quarter from 1.3 percent in the first quarter.
     
     The Reserve Bank of Australia issued the following statement:
     

“At its meeting today, the Board decided to:

  • maintain the cash rate target at 10 basis points and the interest rate on Exchange Settlement balances of zero per cent
  • maintain the target of 10 basis points for the April 2024 Australian Government bond
  • purchase government securities at the rate of $4 billion a week and to continue the purchases at this rate until at least mid February 2022.

Prior to the Delta outbreak the Australian economy had considerable momentum. GDP increased by 0.7 per cent in the June quarter and by nearly 10 per cent over the year. Business investment was picking up and the labour market had strengthened. The unemployment rate had fallen below 5 per cent and job vacancies were at a high level.

The recovery in the Australian economy has, however, been interrupted by the Delta outbreak and the associated restrictions on activity. GDP is expected to decline materially in the September quarter and the unemployment rate will move higher over coming months. While the outbreak is affecting most parts of the economy, the impact is uneven, with some areas facing very difficult conditions while others are continuing to grow strongly.

This setback to the economic expansion is expected to be only temporary. The Delta outbreak is expected to delay, but not derail, the recovery. As vaccination rates increase further and restrictions are eased, the economy should bounce back. There is, however, uncertainty about the timing and pace of this bounce-back and it is likely to be slower than that earlier in the year. Much will depend on the health situation and the easing of restrictions on activity. In our central scenario, the economy will be growing again in the December quarter and is expected to be back around its pre-Delta path in the second half of next year.

Notwithstanding the strong economic and labour market outcomes pre-Delta, wage and price pressures remain subdued. Over the year to the June quarter, the Wage Price Index increased by just 1.7 per cent.

Housing prices are continuing to rise, although turnover in some markets has declined following the virus outbreak. Housing credit growth has picked up due to stronger demand for credit by both owner-occupiers and investors. Given the environment of rising housing prices and low interest rates, the Bank is monitoring trends in housing borrowing carefully and it is important that lending standards are maintained.

Very accommodative financial conditions will continue to support the recovery of the Australian economy. Borrowing rates are at record lows, sovereign bond yields are at very low levels and the exchange rate has depreciated over recent months. The fiscal responses by the Australian Government and the state and territory governments are also providing welcome assistance in supporting household and business balance sheets.

The Board’s decision to extend the bond purchases at $4 billion a week until at least February 2022 reflects the delay in the economic recovery and the increased uncertainty associated with the Delta outbreak. The Board will continue to review the bond purchase program in light of economic conditions and the health situation, and their implications for the expected progress towards full employment and the inflation target. These bond purchases, together with the low level of the cash rate, the yield target and the funding that has been provided under the Term Funding Facility, are providing substantial and ongoing support to the Australian economy.

The Board is committed to maintaining highly supportive monetary conditions to achieve a return to full employment in Australia and inflation consistent with the target. It will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. The central scenario for the economy is that this condition will not be met before 2024. Meeting this condition will require the labour market to be tight enough to generate wages growth that is materially higher than it is currently.”

    www.CentralBankNews.info



Source: http://www.centralbanknews.info/2021/09/australia-holds-rate-extends-bond.html



Before It’s News® is a community of individuals who report on what’s going on around them, from all around the world.

Anyone can join.
Anyone can contribute.
Anyone can become informed about their world.

"United We Stand" Click Here To Create Your Personal Citizen Journalist Account Today, Be Sure To Invite Your Friends.

Please Help Support BeforeitsNews by trying our Natural Health Products below!


Order by Phone at 888-809-8385 or online at https://mitocopper.com M - F 9am to 5pm EST

Order by Phone at 888-388-7003 or online at https://www.herbanomic.com M - F 9am to 5pm EST

Order by Phone at 888-388-7003 or online at https://www.herbanomics.com M - F 9am to 5pm EST


Humic & Fulvic Trace Minerals Complex - Nature's most important supplement! Vivid Dreams again!

HNEX HydroNano EXtracellular Water - Improve immune system health and reduce inflammation

Ultimate Clinical Potency Curcumin - Natural pain relief, reduce inflammation and so much more.

MitoCopper - Bioavailable Copper destroys pathogens and gives you more energy. (See Blood Video)
Oxy Powder - Natural Colon Cleanser!  Cleans out toxic buildup with oxygen! 
Nascent Iodine - Promotes detoxification, mental focus and thyroid health.
Smart Meter Cover -  Reduces Smart Meter radiation by 96%!  (See Video)

Immusist Beverage Concentrate - Proprietary blend, formulated to reduce inflammation while hydrating and oxygenating the cells.

Report abuse

    Comments

    Your Comments
    Question   Razz  Sad   Evil  Exclaim  Smile  Redface  Biggrin  Surprised  Eek   Confused   Cool  LOL   Mad   Twisted  Rolleyes   Wink  Idea  Arrow  Neutral  Cry   Mr. Green

    MOST RECENT
    Load more ...

    SignUp

    Login

    Newsletter

    Email this story
    Email this story

    If you really want to ban this commenter, please write down the reason:

    If you really want to disable all recommended stories, click on OK button. After that, you will be redirect to your options page.