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Australia’s central bank has improved the economic outlook and said it will consider whether to roll over its target yield bond and undertake further quantitative easing in July, while maintaining interest rates to remain at levels of emergency at least until 2024.
As expected, Reserve Bank Governor Philip Lowe on Tuesday kept the spot rate and the three-year yield target at 0.10% in Sydney. The bank is currently in its second round of A $ 100 billion ($ 77.5 billion) quantitative easing and must decide to shift control of the yield curve to target the November 2024 deadline relative to the current obligation of April 2024.
“The board is committed to maintaining very favorable monetary conditions,” Lowe said in A declaration. “The board is prepared to undertake further bond purchases to help move towards full employment and inflation targets. The council gives high priority to the return to full employment. “
The Australian dollar rose after the release, before retracing much of that gain and buying 77.44 US cents at 2:58 p.m. in Sydney.
The RBA’s decision not to budge comes a week before the government releases its annual budget which is expected to include targeted spending to help boost jobs and accelerate a faster recovery. Treasurer Josh Frydenberg aligned himself with Lowe’s goal of pushing the economy towards full employment as quickly as possible to revive inflation.
Lowe said the bank’s central scenario for GDP growth has been revised upwards, with an expansion of 4.75% now expected this year and 3.5% in 2022. Unemployment is expected to continue falling at around 5% at the end of this year and around 4.5% at the end of 2022.
Australia’s unemployment rate has already fallen almost 2 percentage points from its pandemic peak in July last year. The RBA estimates that it probably needs to get closer to 4% before wage growth picks up.
The central bank releases its quarterly update with the full set of economic forecasts on Friday, and Deputy Governor Guy Debelle is due to speak in the mining state’s capital, Perth, the night before.
While Australia has seen a strong V-shaped recovery, the RBA shows no signs offollowing the early withdrawal of the stimulus by the Bank of Canada. Instead, like the Federal Reserve and the European Central Bank, it will continue to pump monetary support until the economy is fully recovered. He would also like to follow any move by the United States to avoid unnecessary exchange rate appreciation.
The only area likely to give Lowe a headache is the real estate market. Housing has jumped in response to record borrowing costs, government assistance and a lack of supply. Real estate priceshas grown 7.8% in the past year, and while similar increases have occurred around the world, a return to the boom period Down Under threatens to inflate an already worrisome heap of household debt .
“The bank will closely monitor trends in home loan borrowing,” Lowe said. “It is important that lending standards are maintained.”
The government budget next Tuesday is likely to show aimproved outcomes through better employment outcomes that boost tax levies and reduce social costs. It also benefited from the high price of iron ore, the country’s largest export. The steelmaking ingredient is currently trading at around $ 190 and Citigroup Inc. predicts a prolonged deficit in the product and expectsnew highs of $ 200 to be reached in the coming weeks.
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