Australian CB left the rate unchanged indicating further stimulation of economy


The Central bank of Australia has again left monetary policy unchanged. This was demonstrated on Tuesday by the Reserve Bank of Australia’s latest interest rate decision.

The bank indicated on Tuesday that the implementation of the vaccination programmes supports the recovery of the world economy, although the policy body described the pace of implementation as unbalanced.

The RBA stated on Tuesday that World Trade has started, while the country’s important commodity prices are generally higher than at the beginning of the year. Inflation is still below the target set by the Central bank of Australia, which expects inflation to remain below 2% in the next few years.

Interest rate policy is still maintained as long as inflation does not reach a sustainable rate of between 2% and 3%, A level that the bank sees as dependent on wage developments. The RBA does not expect this situation until 2024.

Australia’s economy now seems to be recovering more strongly than expected. The unemployment rate fell to 5.8 per cent in February, while the number of people in employment rose to pre-coronavirus levels.

In the last quarter of 2020, the economy grew 3.1 percent, supported by increased household consumption. This growth is expected to continue this year and next. On the other hand, downward price and wage pressure must be taken into account in the coming years.

The housing market has further improved with increased prices in most housing segments, with particularly strong demand from housing market players.

The bond purchase programme is almost complete, after which a further programme of the same size will enter into force next week. As far as the bank is concerned, this could still be extended if necessary.

The RBA’s balance sheet has increased by 215 billion Australian dollars since early 2020.

The Australian dollar fell 0.1 percent to 0.7641 U.S. dollars on Tuesday.

About the author

Nicholas de Kramer

Nicholas de Krammer, а self-taught economic analytic with heave mathematical background. Math behind the economics (and economics behind math) is the strong side of the author. Contact him at [email protected]

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