The Reserve Bank of Australia has committed to extending its quantitative easing program of bond purchases beyond September 2021.
In a speech, RBA governor Philip Lowe said the RBA had been considering its actions once the first six-month round of quantitative easing concluded in September.
There were four options, he said, which were ceasing bond purchases, repeating the $100 billion purchase programme for a second time, scaling back the amount purchased or spreading it over a longer period or moving to an approach where the pace of bond purchases was reviewed more frequently based and data and economic outlook.
“The bond purchase program has also been an important part of the RBA's monetary policy response. It has lowered bond yields and funding costs across the economy and contributed to a lower exchange rate,” he said.
“We have made no decisions yet, other than to rule out the first option – the cessation of bond purchases in September. The RBA's bond purchase program is one of the factors underpinning the accommodative conditions necessary for our economic recovery. It is premature to be considering ceasing bond purchases.”
There would be no increase in the cash rate until inflation was within 2% to 3% target range which the RBA said was “some way off”. The central bank had previously said rates were expected to remain at 0.1% until late 2023.
“Inflation pressures remain subdued and are likely to remain so. For inflation to be sustainable in the 2% to 3% range, wage increases will need to be materially higher than they have been recently. Partly for the reasons I talked about earlier, this still seems some way off,” he said.