CANBERRA, AAP – The Reserve Bank of Australia left the cash rate unchanged at a record low 0.1 per cent at its monthly board meeting.
However, the central bank is sticking with its decision to wind back one of its key stimulus measures, despite a deteriorating economic outlook caused by lengthy coronavirus lockdowns in the nation’s two major cities.
RBA governor Philip Lowe said Australia’s recovery had been interrupted by the outbreak of the Delta variant and the economy was expected to decline materially in the September quarter.
“This setback to the economic expansion is expected to be only temporary,” Dr Lowe said in a statement following Tuesday’s meeting.
“The Delta outbreak is expected to delay, but not derail, the recovery.”
As such, the central bank will now be buying $4 billion worth of bonds per week rather than $5 billion as announced earlier this year.
Its bond-buying program aims to keep market interest rates and borrowing costs low.
Dr Lowe reiterated the RBA would not increase the cash rate until actual inflation was sustainably within the two to three per cent target range.
“The central scenario for the economy is that this condition will not be met before 2024,” Dr Lowe said.
“Meeting this condition will require the labour market to be tight enough to generate wages growth that is materially higher than it is currently.”