Central Banks


RBA announces their latest monetary policy decision – 5 May 2020

  • Reaffirms 0.25% yields target for 3-year government bonds
  • Global economy experiencing a severe downturn
  • Will not increase cash rate until inflation, employment goals are met
  • Australian economy going through a very difficult period
  • There is considerable uncertainty about the outlook
  • Functioning of bond market has improved
  • Scaled back frequency and size of bond purchases
  • But is prepared to scale-up purchases again and do whatever is necessary

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There isn’t much meaningful change in the language as the RBA continues to paint a rather bleak picture of the economy i.e. 10% unemployment rate, drop in output by 10%, and inflation expected to turn negative in Q2.

The thing to note is that they have scaled back on QE a little but that isn’t so much so a surprise since they have been mainly using it as a yield curve control (YCC) tool.

In that sense, as long as they are hitting their yields target, it doesn’t matter about the amount of bonds they are buying. If you need reminding, it is the same reason why the BOJ going ‘unlimited’ holds no significant change to policy.



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