RBA’s Lowe: Effectiveness of yield target as a monetary policy tool declined


The Reserve Bank of Australia (RBA) Governor Phillip Lowe said the following in the press conference, following the central bank’s monetary policy decision announced earlier this Tuesday.

Key quotes

The yield target has been effective and has supported the recovery of the Australian economy.

But its effectiveness as a monetary policy tool declined as expectations about future interest rates shifted due to the run of data and the forecast progress towards our goals.

I want to make it clear that this decision does not reflect a view that the cash rate will be increased before 2024.

There is genuine uncertainty as to the timing of future adjustments in the cash rate.

It is still entirely possible that the cash rate will remain at its current level until 2024.

Our forward guidance is based on the state of the economy, not the calendar.

The latest data and forecasts do not warrant an increase in the cash rate in 2022.

We will be including the April 2024 bond in our regular auctions from next week.

Underlying inflation reached the midpoint of the target range for the first time in seven years does not, by itself, warrant an increase in the cash rate.

Configuration of inflation and wages growth allows the board to be patient in considering a lift in interest rates.

Board judged that it was no longer sustainable to maintain the target of 10 basis points.

Prepared to look through spikes in the inflation rate.

Market reaction

The aussie dollar is little changed on these comments, as AUD/USD keeps its range around 0.7495, down 0.43%, as of writing.

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

EUR/USD retreats toward 1.0850 on modest USD recovery

EUR/USD retreats toward 1.0850 on modest USD recovery

EUR/USD stays under modest bearish pressure and trades in negative territory at around 1.0850 after closing modestly lower on Thursday. In the absence of macroeconomic data releases, investors will continue to pay close attention to comments from Federal Reserve officials.

EUR/USD News

GBP/USD holds above 1.2650 following earlier decline

GBP/USD holds above 1.2650 following earlier decline

GBP/USD edges higher after falling to a daily low below 1.2650 in the European session on Friday. The US Dollar holds its ground following the selloff seen after April inflation data and makes it difficult for the pair to extend its rebound. Fed policymakers are scheduled to speak later in the day.

GBP/USD News

Gold climbs to multi-week highs above $2,400

Gold climbs to multi-week highs above $2,400

Gold gathered bullish momentum and touched its highest level in nearly a month above $2,400. Although the benchmark 10-year US yield holds steady at around 4.4%, the cautious market stance supports XAU/USD heading into the weekend.

Gold News

Chainlink social dominance hits six-month peak as LINK extends gains

Chainlink social dominance hits six-month peak as LINK extends gains

Chainlink (LINK) social dominance increased sharply on Friday, exceeding levels seen in the past six months, along with the token’s price rally that started on Wednesday. 

Read more

Week ahead: Flash PMIs, UK and Japan CPIs in focus – RBNZ to hold rates

Week ahead: Flash PMIs, UK and Japan CPIs in focus – RBNZ to hold rates

After cool US CPI, attention shifts to UK and Japanese inflation. Flash PMIs will be watched too amid signs of a rebound in Europe. Fed to stay in the spotlight as plethora of speakers, minutes on tap.

Read more

Forex MAJORS

Cryptocurrencies

Signatures