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Summary
- The Reserve Bank of Australia (RBA) left the official interest rates unchanged at 0.1 per cent.
- The central bank said that the cash rate would not be increased until the inflation remains sustainable between the target range of 2 per cent and 3 per cent.
- The central bank announced it would spend an additional A$100 billion for buying federal and state government bonds when the ongoing A$100-billion program ends in mid-April 2021.
The Reserve Bank of Australia (RBA) left the official interest rates unchanged at 0.1 per cent as it expected the economic recovery to be stronger than earlier anticipated. However, the rebound depends on the health situation and significant fiscal and monetary support, said RBA in its first outlook statement for 2021, released on Tuesday.
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The Australian central bank slashed the cash rate to 0.1 per cent in November 2020. The RBA's three-yield bond target rate and the term funding facility for banks were also left unchanged at 0.1 per cent.
The central bank said that the cash rate would not be increased until the inflation remains sustainable between the target range of 2 per cent and 3 per cent. RBA Governor Philip Lowe said that wages needed to grow at a higher rate than the current level for the inflation to remain within this target.
Employment growth needed
Even as strong growth has been recorded in the employment along with the fall in the unemployment rate to 6.6 per cent, more gains in the employment and a return to a tight labour market are needed, Lowe said. However, the central bank doesn’t expect this to happen until 2024 at the earliest, the Governor also said.
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Bond buying program
While the RBA announced no additional stimulus, it extended its bond buying program. The central bank said that it would spend an extra A$100 billion for buying federal and state government bonds when the ongoing A$100-billion program ends in mid-April 2021.
Retail spending
Retail spending is strong, and several households and businesses that had deferred loan repayments during the pandemic period have now started to repay, the central bank said. It has happened due to Australia’s success on health front and significant fiscal and monetary support, it added.
READ MORE: Payroll jobs rise in January; Queensland posts the biggest jump
