RBA Board to consider extending the bond purchase programme

The Reserve Bank of Australia's governor Phillip Lowe has stated that the Board is to consider extending the bond purchase programme.

The governor rebuffed market talk of rate hikes, saying it will take at least until 2024 to reach full employment even as the economy was now within "striking distance" of its pre-pandemic output.

Reuters reports that ''Australia's A$2 trillion ($1.5 trillion) economy expanded by a larger-than-expected 3.1% in the December quarter, clocking its fastest ever back-to-back quarterly rises. Job growth has been sturdy while retail sales are going strong too.''

"These better-than-expected outcomes are very welcome news," the Reserve Bank of Australia's (RBA) governor, Philip Lowe, said in a speech in Sydney.

"However, they do not negate the fact that there is still a long way to go and that the Australian economy is operating well short of full capacity."

Key comments

Reserve Bank of Australia gov lowe says rates to stay at 0.1% until actual inflation in 2-3% band.

Lowe noting market expectation of rate rises in 2022, 2023 says "this is not an expectation we share".

Lwe says unlikely to see wages growth consistent with inflation target before 2024.

Lowe says want to achieve maximum possible sustainable level of employment.

Lowe says possible can sustain an unemployment rate in the low 4s.

Lowe: not considering removing 3-yr yield target or changing from 10 bps.

Lowe says still considering whther to move from april 2024 bond to nov 2024.

Lowe: later in year, board will consider case for further extending bond purchase program.

Lowe: understandable global bond yields moved off historic lows given improving outlook.

Lowe: yields suggest investors more confidence that policy measures will work to lift inflation.

Lowe says this is good news, though expected inflation still not above our target.

Lowe says australia within striking distance of recovering pre-pandemic level of output.

Lowe says recovery in employment has been "v-shaped".

Lowe: recovery still has long way to go, economy operating well short of full capacity.

Lowe says business investment lagging, strong and sustained pick-up needed.

Market implications

The remarks come as financial markets begin pricing in rate hikes by major central banks next year and in 2023 on the back of strong economic data and optimism about successful coronavirus vaccine rollouts, sending bond yields surging, as Reuters reports. Lowe is pushing back on such sentiment in the market which can be a weight for the Aussie.  

AUD/USD is down  0.07% on the session so far.