Today on the Economic Corner, it is a data heavy day with key economic data announcements coming from all across the globe. First up is the Reserve Bank of Australia’s Monetary policy decision. Governor Phillip Lowe said that the global economy is continuing to recover from the pandemic and the outlook is for strong growth this year and next. The recovery remains uneven, though, and some countries are yet to contain the virus. Global trade in goods has picked up strongly and commodity prices are mostly higher than at the start of the year.
However, inflation in underlying terms remains low and below central bank targets. Sovereign bond yields have been steady recently after increasing earlier in the year due to the positive news on vaccines and the additional fiscal stimulus in the United States. Medium-term inflation expectations have lifted from near record lows to be closer to central banks' targets. The 3-year government bond yield in Australia is consistent with the Board's target and lending rates for most borrowers are at record lows.
The Australian dollar remains in the upper end of the range of recent years. The economic recovery in Australia is stronger than earlier expected and is forecast to continue. The Reserve Bank of Australia (RBA) left its policy settings at 0.1 per cent as it awaits inflation and wage pressures. The outcome was expected unanimously by economists polled by Reuters. The Reserve Bank of New Zealand (RBNZ) last week hinted at the end to a pandemic-era, ultra-loose monetary policy, leading some to believe RBA would venture on that path too.