RBA: Yield target successfully reinforced the bank's forward guidance about the cash rate
“Now that the board has more experience with bond purchase programs, it is likely that, in the future, bond purchases would be preferred to a bond yield target,” said the Reserve Bank of Australia (RBA) during its review of yield target.
Additional comments
Any use of a yield target would require close attention to the lessons learned from this experience.
Yield target successfully reinforced the bank's forward guidance about the cash rate.
But its effectiveness as a monetary policy tool waned as market participants reassessed their views of the outlook for the cash rate.
While a bond purchase program offers more flexibility than a yield target, it carries other risks.
Exit experience caused some reputational damage to the bank.
Board has agreed to strengthen the way it considers the full range of scenarios when making policy decisions.
AUD/USD grinds higher
Following the RBA announcement, AUD/USD holds onto the week-start recovery moves, picking up bids to 0.6955 by the press time of early Tuesday morning in Asia.
Also read: AUD/USD hovers around 0.6950s after failures at 0.7000 ahead of RBA Lowe
Author
Anil Panchal
FXStreet
Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.
