In the minutes of April 6 meeting, RBA said economic recovery was “expected to continue”, with “above-trend” growth forecast in 2021 and 2022. But an important near-term issue was “how households and businesses would adjust to the tapering of several fiscal support measures”. There might be a “temporary pause” in the pace of labor market improvements.
It also reiterated that “wage and price pressures had remained subdued and were expected to remain so for several years”. It would “take some time” to reduce the spare capacity to generate wage growth that’s consistent with the inflation target. Annual CPI was expected to rise “temporarily” to around 3% in the middle of the year on “reversal of some pandemic-related price reductions”. But underlying terms inflation was expected to “remain below 2 per cent over both 2021 and 2022.”
Overall, RBA maintained target for cash rate and 3 year AGS yield at 0.10%, as well ass the settings for Term Funding Facility and government bonds purchases. The board does not expect the conditions for raising interest rates to be met “until 2024 at the earliest”.
