Members of the Monetary Policy Committee of the Reserve Bank of Australia decided in their meeting this morning, Tuesday, July 6, to keep the current interest rates at 0.10% levels unchanged as expected, and the Committee decided to continue buying government bonds after the completion of the current bond purchase program in early September These purchases will be at a rate of 4 billion dollars per week until at least mid-November.
The statement issued by the Bank indicated that the economic recovery in Australia is stronger than expected and is expected to continue to improve, and that the labor market continued to recover faster than expected, and the unemployment rate fell to 5.1% in May.
Inflation is expected to reach 1.5% during the current year and reach 2% in the middle of the year 2023, while CPI inflation is expected to rise temporarily to about 3.5% over the course of this year until the second quarter due to the impact of Corona developments.
In turn, the bank will continue its current policy and the bond purchase process until the bank’s target of employment and inflation is achieved. It is unlikely that interest levels will be moved until inflation levels reach 2-3% in a sustainable manner, and according to the bank’s estimates, it will not be reached before 2024.
For his part, Australian Bank Governor Philip Lowe stressed in his health conference, which was held after the announcement of the interest rate decision, that the bank is not likely to resort to raising interest rates until inflation rates stabilize within the bank’s target range.
The Australian dollar rose against the US dollar by more than 70 pips after the statement, as it is now trading before the opening of the European markets at 0.7590 levels.