It’s been more than a year since the RBA started using a range of unconventional monetary policies in response to the impact on the economy of the pandemic driven lockdowns and we are now seeing a strong recovery. Normally the RBA might now be starting to contemplate rate hikes for some time in the next year but their operating function is now very different to that seen prior to the pandemic.

RBA on hold again

As was widely expected, the RBA left monetary policy on hold at its April meeting. While again acknowledging that the global and Australian economies are recovering faster than expected the RBA reiterated that:

• it will not increase the cash rate from 0.1% until actual inflation is sustainably in the 2 to 3 percent target;

• this will require a much tighter jobs market and much

  stronger wages growth and these conditions are not

  expected to be met until 2024 at the earliest; and

• it’s still committed to the 0.1% 3-year bond yield target; and

• it noted that it is prepared to undertake further bond

  purchases beyond current programs if it would help.

  Fortunately, the stabilisation in bond markets and some softening in the $A has taken some pressure off the RBA.

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