RBA holds cash rate at record low 0.10%

As expected, the Reserve Bank of Australia (RBA) held the cash rate steady at 0.10% today and reaffirmed the parameters of the Term Funding Facility (TFF) and bond purchase program.

In a nutshell:

  • The RBA expects GDP to return to its pre-COVID level by mid-year.
  • Wage growth and inflation are expected to remain subdued for the foreseeable future owing to abundant spare capacity.
  • The RBA is not concerned about house prices.
  • The RBA will continue to keep interest rates low by stepping up its bond purchasing activity.
  • The RBA will maintain “highly supportive monetary policy” until actual inflation rises into its 2% to 3% target range, which it does not expect until at least 2024.

Below is the full statement by governor Phil Lowe:

At its meeting today, the Board decided to maintain the current policy settings, including the targets of 10 basis points for the cash rate and the yield on the 3-year Australian Government bond, as well as the parameters of the Term Funding Facility and the government bond purchase program.

The outlook for the global economy has improved over recent months due to the ongoing rollout of vaccines. While the path ahead is likely to remain bumpy and uneven, there are better prospects for a sustained recovery than there were a few months ago. Global trade has picked up and commodity prices have increased over recent months. Even so, the recovery remains dependent on the health situation and on significant fiscal and monetary support. Inflation remains low and below central bank targets.

The positive news on vaccines together with the prospect of further significant fiscal stimulus in the United States has seen longer-term bond yields increase considerably over the past month. This increase partly reflects a lift in expected inflation over the medium term to rates that are closer to central banks’ targets. Reflecting these global developments, there have been similar movements in Australian bond markets. Changes in bond yields globally have been associated with volatility in some other asset prices, including foreign exchange rates. The Australian dollar remains in the upper end of the range of recent years.

In Australia, the economic recovery is well under way and has been stronger than was earlier expected. There has been strong growth in employment and a welcome decline in the unemployment rate to 6.4 per cent. Retail spending has been strong and most of the households and businesses that had deferred loan repayments have now recommenced repayments. The recovery is expected to continue, with the central scenario being for GDP to grow by 3½ per cent over both 2021 and 2022. GDP is expected to return to its end-2019 level by the middle of this year.

Wage and price pressures are subdued and are expected to remain so for some years. The economy is still operating with considerable spare capacity and the unemployment rate remains higher than it has been for some years. Further progress in reducing spare capacity is expected, but it will be some time before the labour market is tight enough to generate wage increases that are consistent with achieving the inflation target. In the central scenario, the unemployment rate will still be around 6 per cent at the end of this year and 5½ per cent at the end of 2022. In underlying terms, inflation is expected to be 1¼ per cent over 2021 and 1½ per cent over 2022. CPI inflation is expected to rise temporarily because of the reversal of some COVID-19-related price reductions.

The current monetary policy settings are continuing to help the economy by keeping financing costs very low, contributing to a lower exchange rate than otherwise, and supporting the supply of credit and household and business balance sheets. Together, monetary and fiscal policy are supporting the recovery in aggregate demand and the pick-up in employment.

Lending rates for most borrowers are at record lows and housing prices across Australia have increased recently. Housing credit growth to owner-occupiers has picked up, but investor and business credit growth remain weak. Lending standards remain sound and it is important that they remain so in an environment of rising housing prices and low interest rates.

The Bank remains committed to the 3-year yield target and recently purchased bonds to support the target and will continue to do so as necessary. Also, bond purchases under the bond purchase program were brought forward this week to assist with the smooth functioning of the market. The Bank is prepared to make further adjustments to its purchases in response to market conditions. To date, a cumulative $74 billion of government bonds issued by the Australian Government and the states and territories have been purchased under the initial $100 billion program. A further $100 billion will be purchased following the completion of the initial program and the Bank is prepared to do more if that is necessary. Authorised deposit-taking institutions have drawn $91 billion under the Term Funding Facility and have access to a further $94 billion. Since the start of 2020, the RBA’s balance sheet has increased by around $175 billion.

The Board remains committed to maintaining highly supportive monetary conditions until its goals are achieved. The Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. For this to occur, wages growth will have to be materially higher than it is currently. This will require significant gains in employment and a return to a tight labour market. The Board does not expect these conditions to be met until 2024 at the earliest.

Unconventional Economist

Comments

  1. tsport100MEMBER

    “Lending standards remain sound”??? LOL

    If banks where using ‘sound’ lending standards, the mortgage market would grind to a halt. What-ever happened to those blacklist suburbs from 2017? Have banks actually stopped lending there? Instead we have property prices taking off again, the Feds looking to tap super for house deposits and never-ending incentives to lure more FHBs being into the market at 10x income

    It’s an enormous Ponzi Scheme…. how is that ‘sound’ economics?

  2. Covid19MEMBER

    [
    The Reserve Bank has left interest rates unhinged at a record low 0.1 per cent, maintaining its commitment to supporting the economy through unprecedented brrrrrr
    ]

    • but what happens when the plebs notice the brrr and want more paper notes for for the same goods or services?

      • They won’t get it if the immigration taps are turned back on. Literally deflation in wages and inflation in assets and necessities such as healthcare and education. This won’t end until there is a war or revolution.

      • You know how black markets develop – like they did in Argentina, Zimbabwe, Venezuela and other places. In good old days, the sellers of the goods and the services refused to accept the local currencies and instead accepted USD.

        Nowadays, perhaps BTC or gold.

  3. happy valleyMEMBER

    Must have given the RBA the sh.ts not to go negative, but there’s always next month?

  4. It was Porter

    I hope they overcook things and we get high inflation that would make things interesting.

  5. pfh007.comMEMBER

    Could someone please reassure us that we need not worry about a housing bubble because

    APRA !!!!!
    APRA !!!!!
    APRA !!!!!
    APRA !!!!!

    I find I always sleep easier after the loons supporting QE, ZIRP, NIRP and TFF remind us that APRA is always standing ready to ensure that all that cheap money is directed only to productive purposes and devaluing the AUD so we can start building cars again.

    Don’t forget there is an alternative to this loopy monetary madness and it is very simple.

    End the private banks monopoly over RBA deposit accounts and you immediately end the monetary systems near total dependency on private bank debt peddling as money.

    https://theglass-pyramid.com/2021/02/06/rba-watch-end-the-bank-monopoly-of-the-reserve-bank-of-australia-now/

  6. The RBA is not concerned about house prices.

    That’s because all RBA board members own multiple investment properties themselves!

  7. DingwallMEMBER

    I can image the conversation over a glass of sherry afterwards.
    ” I say Philip how’s that Canberra portfolio of yours going? Sold anything into this feeding frenzy?”
    “Oh it’s going along nicely. It’s one for the long-term of course so no sales there. That said, I did sell about 27 properties elsewhere through the January/February period…… timed it beautifully with those foundations of a perfect storm I helped create …… well done me what!!”

    • happy valleyMEMBER

      Excuse me, sherry – how crass. The RBA board only does Cristal champagne and caviar and that’s after every board meeting when they toast themselves as to how much they’ve made for the month on the IP portfolio and how much more miserable they’ve made the lives of fixed interest income reliant retirees. Pip! Pip!

  8. MathiasMEMBER

    RBA: ” I really hope interest rates dont keep going down. If they do, then the Aussie Dollar is going to be really screwed. We need to do everything in our power to ensure the Australian Dollar isnt DEAD. Lets print some more money quickly to create some inflation, to ensure the people that the Aussie Dollar isnt dead yet “.

    Another 17 years? Aint going to happen.

    Not when Interest Rates have been falling like this…
    https://gyazo.com/d1ad61bb3f86dc71ba8e4654a57c6869?token=df021198b08524576384db3590fb6c4c

    Its desperation. Nothing more.

    There is no way Australia is going to survive another 17 years of Aging Population and Interest Rate falls, having totally destroyed its own Economy and Wiped out its own Currency.

    Dog Sh*t will be more valuable then the Australian Dollar in a few years. Gold will be more valuable.

    I thought this stuff would take us many years before this level of crashing would occur. Thanks to all the corruption, Stubborn Boomer Behaviour and the countless Ego’s we’ve done an amazing job at speeding up the decline. We are now falling faster then even I had predicted. All this money printing is going to speed up the demise.

    I hope economics has a Plan B because Australias Demographics are stuffed. Our Social Inequality is stuffed. Our Currency is stuffed. Stocks and Real Estate will be stuffed soon. Aside from US printing all this gargantuan amounts of money and China causing Commodities falls, I still think Commodities are still the best medium to date.

    Ages back there was a question going around, ” Whats going to be better during a crash, the US dollar or Gold? “. I think we’ve found our answer. At the time, I took a guess and said, ” Gold “. What we are seeing before our eyes is history unveiling. In some ways, its almost very exciting. As history goes, we are living through some truly amazing times in history despite all the negative concequences. The fact US is printing itself into insanity and going to collapse its own interest rates faster then anything over the next few years ( is war coming? ) suggests to me that the USD (DXY) is basically cactus. As a medium of exchange, the USD has no value in coming years except down which in my mind, positions Commodities ( Gold / Silver / Platinum ) as the strong contendors in this race.

    Sure. Deflation is Deflation. There are no winners in this war. Everyones going to suffer and we are all going to suffer hard. However, I think in the end, Gold / Silver / Platinum will be retainers of value while Bitcoins collapses, USD collapses and pretty much everything we hold valuable is going to collapse.

    The other argument is Real Estate is going to come out ontop. I dont agree. Not only is Real Estate severely over-priced going into a future where half the worlds population is on the cusp of dying… but Governments will also be forced to face reality if they are going to reignite Countrys from all this dying growth. Its not just the death of economic growth that matters, its going to be the social emergencys that are going to play out because past Governments have stuffed the system so badly. When the deaths start, any rational Government with half a brain in its head, whether kicking or screaming, is going to literally be forced to accept that if they dont do something about Future Inequality then people are literally going to die. It wont even be a choice. Its just going to have to happen or Australia is never going to move forward, ever. For this reason, Governments will inevitably have to face up to Real Estate Prices as a matter of Social Inequality or come to realise that this Country is going to collapse into depression. In my opinion, Real Estate is not a store of value and its future is not going to last. We could go back to the sugar cane days of Landlords and Slaves ( and stagflation ). The problem politicians have is Democracy. Sooner or later, Australian Voters are going to wake up and vote in there own self-interests. Eventually, political ego’s wont matter. If there’s one thing I know about humans is they will vote in self-interest and ” survival ” is a self-interest. In order to win elections, Governments will have to face the will of the people or accept they are never going to be elected. That… is the strength… of Democracy.

    As far as Im concerned the Aussie Dollar is already dead. Its going to die with the Boomers. Bitcoins is dead. Gold / Silver / Platinum is going to be the future currency until something better comes along.

    There is way too much Ego for this to be decided today. We are still too arrogant to even see the problem, let alone find the solution. We still have a lot of arguing to do and in the meantime, its all going to fall apart and we will be taking the Aussie Currency down with us. The Aussie Dollar is dead. In my opinion, the Aussie Dollar is dead and its going to die with the Boomers.

  9. MathiasMEMBER

    Someone needs to write a Book about this. ” The day Australian Neo-Liberalism destroyed the Aussie Dollar “.

    Im sure it’ll be a best seller.

  10. Question…… what is the mechanism that will ‘force’ Aust housing and consumer interest rates higher and decouple from the official int. rate ?
    Is it govt bonds, although they’re decoupled now in reality aren’t they? Or will the ‘market’ actually do it itself ?
    There’s dozens of opinions out the, who’s right?

    • If US rates start to rise they won’t be left with a choice because the AUD falling will exacerbate any inflation.

    • happy valleyMEMBER

      Who in their right mind would believe anything the RBA happy clappies said?

    • MathiasMEMBER

      Ha ha… yeah, its bloody amazing isnt it. Libs are losing Control 🙂

      Would now be a good time to tell you I brew my own Home Brewed Beer? Man its delicious. As a dash of salt mikes good pasta, a single squeeze of a Lime makes great Beer Bewdiful. I open up a bottle just for these celebratory occasions.

      Wow… China loving Martin North ( he will do anything for money that guy ) decides to give a sh*t about ” The Children “.
      https://www.youtube.com/watch?v=NkeZiKJA4ck

      ” The reason there’s so much talk of Extremism in Australia is because Trust has Collapsed ” <– Brilliant.
      I love John Adams. Pitty about the company he keeps.

      Martin has his good points but he is a scumbag and he is surrounded by scumbags. He's a Pro-Boomer ( and consequently Pro-Chinese ) so what do you expect.

      Wow… so… " Far Right Extremism " is really just a cover for " Anti-Migration ". So Macrobusiness must be the leader of Far Right Extremists then? bahahahaha. What happened to living in a Democratic Country? When did Democracy get hijacked in Australia by a bunch of nutjobs looking to silence speech that hurts there money?

      There are a few good Australians left. Not many, but a few.

      I hope MB doesnt mind… but I'll probably be a life long supporter at this rate ;p

      At some point, Im just going to subscribe for 10 years ( if the system actually allows it ). I dont care whether I can afford the money. I'll be finding it.

      I want to support the good people in Australia. SAP needs to get off there bum, setup a proper website and get some more Media going as well. I realise they might not have as much money but there media exposure is atrocious. They need to open themselves up more to idiots like myself who'd like to support them. Facebook has just been exposed for all the garbage it does so William needs to shift his conversations off Facebook and onto his own Website. He can still operate on Facebook if he wants to draw an audience ( most of the people are on facebook ) but he should be linking to his own Website as well ( imo ).

      You have to be careful to put your trust in vested social media like Facebook and Twitter. It might not be as trustworthy in the future. I have deep concerns about what these websites are doing with peoples Data. They are basically selling your lifes information for profit.

      • MathiasMEMBER

        Yeah. Trump printed $800 bill in December and it did bugger all. $1.9 trillion sounds like a lot of money but its also pushing up against a wall of US debt. Im a little dubious that its going to bring about as much inflation as the hype and hysteria is pretending it will. I think the US has so many social issues going on that it’ll probably be like pouring water on sand. It’ll just end up absorbed and it’ll just go nowhere. Its good politics, I think, but should of happened 20 years ago. I think US problems are now too deep and Im not so sure they’ll be able to buy this one away so easily. Ha ha… and they have an Aging Population coming up over the next 17 years thats just going to tighten the screws.

        But what do I know. The worlds gone absolutely insane right now. You practically need to be a trained economist just to live life these days. You cant even start a business anymore. At one of the most sensitive times when Australians need Leadership, our own Governments abandoned us and left us all to die. We’ve turned inwardly corrupt and falling apart at the worst moment possible. Its utter lunacy.

        I give credit to anyone who can stay calm and composed during these times because I have to admit, I have a hard time doing so because its all turning to crap imo.

        People just want to ‘Live Life’… and I think we went past that years ago.

        • Yeah the only thing about this bond yield inflation hype is that the yields have been ticking up since last august though. They only start moaning now because the bots prob have an auto sell when the valuations do not sustain the risk free rates that it pushed up against last week.
          So i get the passing impulse theory but if u ask the bond market it is not different to what has been since last august. Doesnt point to a sudden hype on this issue. Still, there is a chance it will retrace a tack. Would expect THAT to be temporary before continuing though. I dunno.

      • MathiasMEMBER

        I think the entire US Economy is overvalued. I think the DXY which is currently trading at 91 is going to collapse to 64 at some point. The social consequences coming up in the future to something like that would probably turn America on its head.
        https://gyazo.com/587934ba310c7213236abf69e4f7dae3

        If you believe Technical Analysis then falling DXY means a rising EURUSD but Im not so sure anymore. Davids Fundamental Analysis seems to conflict with virtually everything I thought I knew lol. It annoys my ego to admit but he’s a lot smarter then me ha ha. I just find it hard to believe that DXY is going to break high which only leads me to the conclusion that DXY and EURUSD to fall together at some point in the future. I mean, is that even possible? lol. DXY and EURUSD are usually polar opposites. One rises while the other falls but falling together? huh? Wierd.
        https://gyazo.com/9f2a7a2bf26f3a1ea1c0bf361ea60948

        The only way DXY would break high is if we see the mother of all money printing bombs that goes above and beyond anything we’ve ever seen before ( or if the US economy suddenly got fixed overnight ).

        Maybe they could drop money from the sky using one of these:
        https://www.youtube.com/watch?v=MTMcYHrAdl4

        Honestly, I need six Home Brews just to stay ahead of all this stuff because Logic is no longer Logic anymore. Unless your drunk, there’s absolutely nothing here that makes sense. Sounds like I need to go into my own Home Brew Business lol.

        Maybe if America takes over China, enslaves them all and sells them off to the highest bidder then maybe they could fix the DXY? Its certainly possible. The Chinese are selling Korean Slaves for $50 a piece. Surely a Chinese Slave would be worth $60 a piece? Im sure Americans could bid up the price.

        The Boomers could kill off all the young. They’d get to keep all the money then and steal all the property. Other then pay the pensions of this Country the young have done nothing but whine everyday lol. We tried putting them in jail but that didnt work. They just wouldnt shut up. There’s also that little pension problem. As it happens, Angry Boomers hate the Young with such a fierce ferocity that most would murder the young in a second then have them disturb there peace. Australias young are treated worse then the Blacks of South African Apartheid. Nevertheless, as angry as Boomers seem to be, there is that little Pension Problem. As it happens, in order to have a pension, you actually need someone to pay some Tax. For that, you need a young generation who actually does some work to pay that Tax for pensions to even exist. We’ve tried intergenerational fraud by changing the laws to just steal it. We’ve even contemplated just outright murdering the young ( always a good option ). Unfortunately, its dawned upon some Boomers that the same people who are paying all those Taxes are the young people who they need more then they realise. So if we do murder the young, there’ll be no pension lol. I mean, screw it. Lets just print the damn money. Who needs young people anyway? What have the young ever done for the Boomers, right? The Boomers built this Country so those damn young should worship them like Gods, right? Australia can just print money. Now thats a great trick. We print and run migration till the wheels fall off Australia ( which is practically what we are doing ) but as the Liberals are starting to find out, nobody wants to live in Australia anymore lol. Eventually, standards of living are going to collapse so badly in this Country that not even a Nigerian Drug Lord from the Slums wants to live in Australia. Such lovely people those Nigerian Drug Lords. They have such high standards.

        I dont know. Its tough times to be a Psychopath. Whats your average psychopath got to do to get some respect these days lol. All we want to do is steal all the money, kill off half the population and leave Countrys destitute for years to come. We dont call it corruption. We call it Politics. Its just a different point of view then the one many are used to ( although it does have a very close resemblance to corruption but its not corruption ). I mean seriously, a little murder now and again, who does it hurt really? All these whingers. The odd bit of rape. I told her to shuttup and stay quiet. You cant even rape someone these days. Why have we become so soft? Its all for the good of the Country, I assure you.

          • Quite possibly foreign buyers have cleared them out. The Perth Mint seems to get mentioned a bit on YouTube channels that follow bullion prices, the role it plays in the financial system and when people talk about buying physical.

  11. Reverse Bank of Australia continues looking after the rentier class and as for everyone else you are hereby directed to the door that says this way to frenzied speculation

  12. RBA holds cash rate at record low 0.10%

    The good news is : So far it’s working
    The Bad news is : So far it’s working
    The thinking man’s question: how does one ever escape this stupidity?
    The average Aussies question: does this mean I should lock in a fixed rate on my mortgage now? or wait a little longer?

    • In terms of escape? The only way out is a good crash I’m afraid. Even then who knows? Ireland has been at ZIRP for 12+ years now..

      • I’m more and more convinced that a war will be the eventual solution.
        So many of these problems are inescapable on their own, but combine them all together then find a boogyman to blame and we’ve got the beginnings of a solution. Of course the discussion will be structured such that the enemy can neither accept nor reject their role, so it’s off to war we go.
        It’s the tried and true solution purpose built for any population that is yet to see the horrors of war.

  13. MathiasMEMBER

    The Minister accused of Rape says, ” I didnt do it “.
    https://www.youtube.com/watch?v=GbXZWC2ueuo

    This reminds me of Michael Jackson.
    https://www.youtube.com/watch?v=QwFfXnGIQ1M

    So whats this John Adams was saying about the Government covering up Paedophiles as well? How deep does all of this really go? lol.

    Australia needs a National Integrity Committee and until we get one, Australias Government has effectively become a Terrorist Operation in my eyes. Corruption, Fraud, Rape, Murder. Anymore we want to add to the list?

    I’d never make a good politician. I just cant take Australia seriously enough.

    Australias Corruption so serious that its become a protection racket against Australias Military destined to protect this Nation.

    Australias most beloved Military Leaders are even saying it:
    https://www.youtube.com/watch?v=ITLBO4o9PZM

    Here we are attacking ASIO when defending the National Interests crosses swords with Political Corruption:
    https://www.theguardian.com/australia-news/2019/nov/18/paul-keating-lambasts-australias-security-agencies-and-pious-media-for-anti-china-rhetoric

    Ok… so whats next? How can we outdo all of these things in an attempt to destroy Australia any further then whats been done today?

    As long as we can feed Australia House Prices, Murder is no longer a criminal offense anymore and criminal actions can just be wiped under the table.

    Australian House Prices are now ‘ Above the Law ‘ in Australia.