Australia Monetary Policy December 2021


Australia: RBA stands pat in December

December 7, 2021

At its monetary policy meeting on 7 December, the Reserve Bank of Australia (RBA) decided keep the cash rate unchanged at the all-time low of 0.10%, and stated it will continue purchasing government bonds at the rate of AUD 4 billion a week until at least mid-February next year, in order to maintain accommodative financing conditions.

The decision was underpinned by moderate inflationary pressures, as well as the ongoing economic recovery amid a fast vaccine rollout. In Q3, the economy contracted less than expected and underlying inflation came in at 2.1%, while the labor market continued to show positive signs. The Bank expects headline inflation to reach 2.5% in 2023, although some uncertainty stems from the evolution of the health crisis.

The Bank maintained a dovish tone in its communiqué, stating that it is “committed to maintaining highly supportive monetary conditions to achieve a return to full employment”. Moreover, it reiterated that it will not raise the cash rate before inflation is sustainably within the 2.0%–3.0% target range, which will likely take some time. As such, all of our panelists see the cash rate remaining at 0.10% for the whole of next year.

The next monetary policy meeting is scheduled for 2 February 2022.

FocusEconomics panelists forecast the cash rate to end 2022 at 0.10% and 2023 at 0.35%.

Author: Massimo Bassetti, Senior Economist

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Australia Monetary Policy Chart

Australia Monetary Policy December 2021

Note: RBA Cash Rate in %.
Source: Reserve Bank of Australia (RBA).

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