As widely anticipated, RBA left the cash rate unchanged at 0.25% at the October meeting. The yield curve control target also stays at 0.25%. This is the 7th consecutive month that the central bank has kept the monetary policy unchanged. While economic recovery is underway, policymakers judged that the path will be “bumpy and uneven”. Dependent on the outcome of the fiscal budget, there is high chance for RBA to add further easing – likely through rate cut and QE expansion – in coming months.

On the economy, policymakers acknowledged that “a recovery is now underway in most of Australia, although the second-wave outbreak in Victoria has resulted in a further contraction in output there”. They added that the “recovery is likely to be bumpy and uneven and it will be some time before the level of output returns to its end 2019 level”. The members remained concerned about the job market. Although the unemployment rate has fallen from the peak level over the past months, it has remained far above RBA’s long term target. Regarding this the central bank noted that “unemployment and underemployment are likely to remain high for an extended period”. It pledged to keep the monetary policy “for some time given the outlook for the economy and prospect of high unemployment”.

On the monetary policy outlook, the RBA reaffirmed that it would “maintain highly accommodative policy settings as long as is required and will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3% target band”. Meanwhile, it added that it would “consider how additional monetary easing could support jobs as the economy opens up further” and the central bank viewed “addressing the high rate of unemployment as an important national priority”. We view these references as a dovish bias, suggesting that additional rate cut is increasingly likely.

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