RBA kept cash rate target unchanged at 0.10% as widely expected today. The asset purchase program, however, will continue at AUD 4B per week until at least February 2022. However, without much surprise, it discontinue 0.10% target for April 2024 government bonds, effectively abandoning yield curve control.
As for forward guidance, RBA maintain that cash rate won’t be raised until actual inflation is “sustainably within the 2 to 3 per cent target range”. But now, it forecasts inflation to be no higher than 2.50% at the end of 2023, hinting that rate hike could come earlier than that.
In the new economic projection, RBA expects GDP growth to b 3% in 2021, 5.50% in 2022, and 2.50% in 2023. Unemployment rate is expected to trend lower to 4.25% at the end of 2022 and 4.00% at the end of 2023. Inflation is projected to be at 2.25% over 2021 and 2022, and pick up to 2.20% over 2023.
