Quantitative Easing

Australian bank to keep interest rate at 0.1% until mid-2023

Two women walk by the headquarters of the Reserve Bank of Australia in central Sydney, Australia on February 6, 2018. REUTERS / Daniel Munoz / File Photo

Australia’s central bank will likely keep its cash rate at an all-time high of 0.1% for a sixth consecutive meeting next Tuesday, a Reuters poll showed, with rates seen at that level until mid-2023 despite a strong economic rebound.

The 15 economists polled by Reuters this week see no change in policy at the Reserve Bank of Australia (RBA) board meeting on June 1.

The vast majority of those polled do not expect any change in the spot rate until mid-2023.

The RBA cut rates last year to an all-time low of 0.1% and launched a massive quantitative easing program to help lower borrowing costs as the economy grapples with the fallout of the COVID-19 pandemic.

The economy has since rebounded strongly, but the RBA has pledged not to raise rates until inflation returns to its medium-term target range of 2-3%. The latest data for the quarter ended in March showed that a closely watched measure of consumer prices was well below that range at 1.1%.

The RBA has said it will decide at its July board meeting to expand its quantitative easing program. At the meeting, the board will also consider whether or not they want to extend their three-year performance target beyond April 2024.

Investors will be on the lookout for any signs of hawkishness given the strength of the economic recovery, after New Zealand’s central bank resumed releasing its rate trail that signaled rate hikes for next year.

Many economists expect the RBA to decide not to extend its return target, even though it would likely extend QE further.

“Careful communication will be crucial,” ANZ economists wrote in a note Thursday. “On the net, however, it will be difficult for the RBA to appear as hawkish as the RBNZ because it does not publish its expected policy rate trajectory.”

Our standards: Thomson Reuters Trust Principles.

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