RBA Minutes: Discussed the options of reducing the targets for the cash rate and the 3-year yield towards zero, without going negative


The October Reserve Bank of Australia meeting minutes have provided some additional colour on the Board’s view of risks to the economy and the outlook for policy.

The statements are trickling through as follows:

RBA Minutes

Board agreed to maintain highly accommodative policy settings as long as required.

Members observed that the global economy was gradually recovering.

The continuation of the recovery was dependent on containment of the virus.

Continue to consider how additional monetary easing could support jobs.

Australian economy had experienced the largest peacetime economic contraction since the 1930s.

Members noted that the decline in output in the June quarter had been smaller than in most other countries and smaller than had been expected.

Recovery was underway in most of Australia.

The covid-19 outbreak in victoria and associated restrictions on activity had been having a major effect on the economy in that state.

Both unemployment and underemployment were expected to remain high for an extended period.

Recovery was likely to be slow and uneven, and inflation was expected to remain subdued for some time.

Addressing the high rate of unemployment an important national priority.

Board agreed to place more weight on actual, not forecast, inflation in its decision-making.

Australian banking system, with its strong capital and liquidity buffers, had remained resilient and was helping the economy traverse the current difficult period.

Bank stood ready to purchase government securities in the event of a recurrence of market dysfunction

Members recognised that the substantial, coordinated and unprecedented easing of fiscal and monetary policy in Australia was helping to sustain the economy.

Public sector balance sheets in Australia were strong, which allowed for the provision of continued support.

Members considered that fiscal and monetary support would be required for some time given the outlook for the economy and the prospect of high unemployment.

Board  discussed the case for additional monetary easing to support jobs and the overall economy.

Members noted that larger balance sheet expansions by other central banks relative to the reserve bank was contributing to lower sovereign yields in most other advanced economies.

Members discussed the implications of this for the Australian dollar exchange rate.

Members discussed the options of reducing the targets for the cash rate and the 3-year yield towards zero, without going negative, and buying government bonds further along the yield curve.

These options would have the effect of further easing financial conditions in Australia.

Members discussed the options of reducing the targets for the cash rate and the 3-year yield towards zero, without going negative.

In considering the case for further monetary measures, members discussed monetary policy developments abroad and their implications for financial conditions in Australia.

Discussed buying government bonds further along the yield curve.

Members noted that the larger balance sheet expansions by other central banks relative to the reserve bank was contributing to lower sovereign yields in most other advanced economies than in Australia.

Members discussed the implications of this for the Australian dollar exchange rate.

Options would have the effect of further easing financial conditions in Australia.

AUD/USD update

Prior to the Minutes, the Aussie was already under pressure following a trick of comments from

The RBA’s Assistant Governor (Financial Markets) Kent who give a speech at the IFR Australia DCM roundtable webinar and explained an easing bias at the board as follows: 

RBA Kent's comments finally send AUD/USD through support

Subsequently, AUD slipped below intra-day support as seen in the following 150min chart:

The Minutes have not impacted the price of the currency, so far. 

AUD/USD sits at 0.7053 and unchanged over the event. 

Description of the RBA minutes

The minutes of the Reserve Bank of Australia meetings are published two weeks after the interest rate decision. The minutes give a full account of the policy discussion, including differences of view. They also record the votes of the individual members of the Committee. Generally speaking, if the RBA is hawkish about the inflationary outlook for the economy, then the markets see a higher possibility of a rate increase, and that is positive for the AUD.

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