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Australia Monetary Policy September 2021

Australia: RBA keeps accommodative stance unchanged in September

At its monetary policy meeting on 7 September, the Reserve Bank of Australia (RBA) decided to keep the cash rate unchanged at the all-time low of 0.10%. It also left the target for three-year government bond yields at around 0.10%, and stated it will continue purchasing government bonds until at least mid-February next year in order to keep financial conditions accommodative.

The decision was driven by the weakness in the economy in the third quarter following the Delta outbreak and the associated restrictions on activity. Additionally, the Bank judged that wage and price pressures were still subdued, despite the rise in headline inflation logged in Q2. That said, the Bank expected growth to resume swiftly in the fourth quarter, and activity to “be back around its pre-Delta path in the second half of next year”.

The Bank maintained a dovish stance in its communiqué, stating that it is “committed to maintaining highly supportive monetary conditions to achieve a return to full employment”. Moreover, it explicitly ruled out hiking the cash rate before inflation establishes itself within the 2.0%–3.0% target range sustainably, which it does not expect to happen before 2024. As such, all of our panelists see the cash rate remaining at 0.10% for the rest of this year.

The next monetary policy meeting is scheduled for 5 October.

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