Reserve Bank will hold interest rates

Feb 01, 2022
Reserve Bank of Australia has today decided to hold interest rates. Source: Getty

In breaking news, the Reserve Bank of Australia has decided to hold interest rates at 0.1 per cent. Additionally, further purchases in the bond purchase program have been paused indefinitely, with the final date of these purchases happening on February 10, 2022.

According to the media release put out by RBA‘s Governor of Monetary Policy Decision, Philip Lowe, although Omicron has had an impact on the economy, “it has not derailed the economic recovery”.

The press release outlined:

“The Australian economy remains resilient and spending is expected to pick up as case numbers trend lower.

“The RBA’s central forecast is for GDP growth of around 4¼ per cent over 2022 and 2 per cent over 2023. This outlook is supported by household and business balance sheets that are in generally good shape, an upswing in business investment, a large pipeline of construction work and supportive macroeconomic policy settings. The main source of uncertainty continues to be the pandemic.”

Inflation has “picked up more quickly than the RBA had expected” but continues to remain lower than other countries, the media release shared.

“The headline CPI inflation rate is 3.5 per cent and is being affected by higher petrol prices, higher prices for newly constructed homes and the disruptions to global supply chains.”

“In underlying terms, inflation is 2.6 per cent. The central forecast is for underlying inflation to increase further in coming quarters to around 3¼ per cent, before declining to around 2¾ per cent over 2023 as the supply-side problems are resolved and consumption patterns normalise.”

“The decision to end purchases under the bond purchase program follows a review of the actions of other central banks, the functioning of Australia’s bond market and the progress towards the goals of full employment and inflation consistent with target.

“Many other central banks have ended, or will soon end, their bond purchase programs. More importantly, faster-than-expected progress has been made towards the RBA’s goals and further progress is likely.

“In these circumstances, the Board judged that now was the right time to end the bond purchase program. Since the start of the pandemic, the RBA’s balance sheet has more than tripled to around $640 billion, with this expansion providing continuing support to the economy.

“The Board will consider the issue of the reinvestment of the proceeds of future bond maturities at its meeting in May.

 

 

 

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