The Reserve Bank of Australia (RBA) Governor Phillip Lowe is out on the wires now, via Reuters, making a scheduled speech titled "Unconventional Monetary Policy: Some Lessons from Overseas" at the Annual Australian Business Economists Dinner, in Sydney.
Key Quotes:
QE is "not on our agenda" at this point, Aussie hits fresh session highs.
May come a point when QE would help, but "I don’t expect us to get there".
Still expect economy to move in right direction, albeit gradually.
QE would be considered if evidence accumulates that we were unlikely to meet policy goals.
Need evidence that moving away from, rather than towards, goals for full employment, inflation.
Board would then consider buying government bonds as only QE measure.
QE would only be considered should cash rate reach 0.25%.
Would hope other public policy options were also on the agenda.
Use of all QE measures could create "inaction" bias for other policy makers.
Negative interest rates in Australia are extraordinarily unlikely.
We have no appetite" to make outright purchases of private sector assets as part of QE.
No need to provide extra liquidity through market operations.
International experience suggests QE does put downward pressure on both rates and exchange rate.
Would need to balance these positive effects with possible side-effects.
Would need to consider effects of bond buying on market functioning.
Strong evidence that various central bank liquidity measures worked during crisis.
Less convinced that other unconventional measures worked, jury still out.
About RBA’s Lowe
Philip Lowe replaced Glenn Stevens as governor of Australia’s central bank. Lowe was the Deputy Governor of the Reserve Bank of Australia, a position he held since February 2012.
FX Implications
The AUD/USD pair jumped nearly 20-pips and tested the 0.68 handle on Lowe’s comments. At the press time, the aussie is off the 0.6795 highs to now trade near 0.6785 region, still up +0.10% on the day.
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