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Australia Monetary Policy March 2021

Australia: RBA stands pat in March

At its monetary policy meeting on 2 March, 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 reaffirmed the size and extension of its bond-buying plans.

Incoming data suggests that the recovery is underway and is stronger than anticipated, although it remains dependent on substantial fiscal and monetary stimulus. Moreover, the global outlook is continuing to improve thanks to the deployment of vaccines, although possible further outbreaks of the virus still pose a sizable downside risk. All told, the Bank expects the economy to expand 3.5% in both 2021 and 2022. It will therefore be operating with substantial spare capacity, which led the RBA to keep its loose monetary policy stance unchanged.

The Bank kept its dovish tone in its communiqué, stating that it expects to maintain the cash rate at its current all-time low until the labor market returns to full employment, wage growth accelerates substantially and actual inflation is within its 2.0–3.0% target range, which it does not see until 2024.

The next monetary policy meeting is scheduled for 6 April.

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