RBA's Kent: Economic outlook, while improved, is still very uncertain

Christopher Kent, the Assistant Governor (Financial Markets), of the Reserve Bank of Australia has stated in a speech entitled, 'Small Businesses Finance in the Pandemic' ''small businesses play a critical role in the Australian economy.''

Conclusion

''Overall, smaller businesses have suffered significantly from the economic hardship caused by the pandemic. A wide range of monetary, fiscal and private-sector measures have provided support. Indeed, many of those measures obviated the need for small businesses to take out additional debt over the past year. While businesses' confidence has improved markedly of late, a number of businesses, particularly smaller businesses, remain reluctant to take out new loans. Some of this reflects an economic outlook that, while improved, is still very uncertain. Also, access to finance for smaller businesses has been a long-standing challenge. There are a range of policies in place to help support the supply of business credit as the economic recovery proceeds. Given the importance of small businesses to the economy, we will continue to pay close attention to their access to finance and their prospects more broadly.''

Update

• Kent doesn't think monetary policy should or can control asset prices.
• Later in year, board will consider additional bond buying.
• Extending bond buying will depend on economic data.
• Still increasing our bond holdings at reasonably good clip.
• Don't think negative rates are helpful in Australia, it will impede banks' ability to lend.

Market implications

AUD/USD is interested in only one thing today, and that is the Federal Reserve. 

The market is silent in anticipation of the Fed's chair statement and press conference. 

• Federal Reserve Preview: The Good, the Bad and the Ugly edition, three critical things to watch

AUD/USD technical analysis: AUD/USD Price Analysis: Bulls look to daily resistance target