RBA: Will not increase the cash rate target until inflation, employment goals are met


Following are the key headlines from the April RBA monetary policy statement (via Reuters):

Reaffirmed 0.25% target for yield on 3-year government bonds.

Global economy is experiencing a severe downturn as countries seek to contain the coronavirus.

Containment measures have reduced infection rates in a number of countries.

Board will not increase the cash rate target until inflation, employment goals are met.

If this continues, a recovery in the global economy will start later this year.

Board is committed to do what it can to support jobs, incomes and businesses during this difficult period.

Australian economy is going through a very difficult period and there is considerable uncertainty about the outlook.

Will maintain its efforts to keep funding costs low in Australia and credit available to households and businesses.

Baseline scenario, output falls by around 10% over the first half of 2020 and by around 6 per cent over the year as a whole.

This is followed by a bounce-back of 6% next year.

In various scenarios considered by the board, inflation remains below 2% over the next few years.

Australian banking system, with its strong buffers of capital and liquidity, is also helping the economy traverse this difficult period.

CPI is expected to turn negative temporarily in the June quarter, due to falls in oil prices, introduction of free child care and deferrals of various price increases.

In the baseline scenario unemployment rate peaks at around 10 per cent over the coming months and is still above 7% at the end of next year.

Further out, in the baseline scenario inflation is 1 to 1½ per cent in 2021 and gradually picks up further from there.

Stronger economic recovery is possible if there is further substantial progress in containing the coronavirus in the near term.

Reimposed outcomes would be even more challenging than those in the baseline.

 

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