RBA cuts rates and launches QE, doesn't see hike for three years
Central bankers Down Under cut official interest rates further to see the economy through an expected soft patch over the next two years.
While the cut in rates was anticipated, the Reserve Bank of Australia also launched a AUD$100bn six-month government bond purchase programme.
And yet, as of 1031 GMT the country's currency was 0.92% stronger versus the US dollar at 0.7120.
According to the RBA, the fallout from the pandemic was expected to keep annual wage growth below 2% in 2021 and 2022, while underlying inflation was set to run at just 1% next year and at 1.5% in 2022.
However, the monetary authority revised its short-term economic projections higher, predicting that the economy was set to grow by close to 6% over the year to June 2021, up from the 4% it had penciled-in in June.
In parallel, thanks as well to fiscal stimulus, unemployment was now expected to peak a little below 8%, instead of at 10%.
The target for the cash rate, the three-year yield target and the interest rate for the term funding facility were all lowered by 10 basis to 15bp.
The interest rate on Exchange Settlement balances meanwhile was lowered from 10bp to zero.
The RBA also said it expected it to take three years for "materially higher" growth to return actual inflation to target in a sustained way.
"It is not enough for inflation to be forecast to be in the target range. For inflation to be sustainably within the target range, wage growth will have to be materially higher than it is currently.
"This will require a lower rate of unemployment and a return to a tight labour market. On the current outlook, it will take some years to get there. Given this, the Board is not expecting to increase the cash rate for at least three years."