The Australian central bank aims to keep rates low
Like many other regions, the Australian central bank lowered its policy rate last year to battle the COVID-19 economic fallout. After rate cuts in both March and November 2020, Australia’s benchmark interest rate reached a record low of 0.1%. In its latest monetary policy decision statement on 2 March 2021, the Reserve Bank of Australia (RBA) reiterated its accommodative monetary policy stance and reaffirmed its intention to maintain the current policy rate until inflation reaches its target – something not likely to happen until 2024 by the bank’s own assessment.1 Meanwhile, the RBA also vowed to keep its three-year treasury yield under its pre-set target of 0.1% to keep the economy’s borrowing cost low.2
The RBA’s aim of maintaining Australian treasury yields within target is clear. In February, US treasury yields climbed rapidly amid global economic recovery and rising inflation expectations. Similar movements in treasury yields were seen in other markets, including Australia. In response, the RBA increased its bond-purchasing efforts. And it was reported that the Australian central bank also lifted the cost to short government bonds.
The RBA has been increasing its bond-purchasing efforts*
Weekly bond purchase under RBA's QE program (green) and additional purchase (red) to strengthen its three-year yield control