Live markets, Tuesday, October 5, 2021
The Reserve Bank has kept official interest rates stable and has remained determined to gradually reverse its quantitative easing program pending the reopening of much of the economy after the COVID-19 lockdown.
At its regular monthly meeting today, the RBA board of directors kept the official cash rate at 0.1%, where it has been since November of last year.
The decision was in line with market expectations and economists’ forecasts. He also maintained his decision to reduce government bond purchases to $ 4 billion per week, keeping them at that rate at least until mid-February next year.
The move came after the latest ANZ measure of job vacancies fell 2.8% in September, the third consecutive monthly decline.
Since the lockdowns began in New South Wales, job vacancies have fallen 6.8%. Despite the drop, they are still up almost 61% from September last year.
ANZ senior economist Catherine Birch said job declines so far have been concentrated in NSW, but there would likely be a drop in Victoria.
Younger workers and those in lower-paying jobs have been hit the hardest by the lockdown, but Ms Birch said once the economy reopens there will be a strong recovery.
“As NSW and Victoria gradually reopen during the December quarter, we expect ANZ job postings, employment and hours worked to rebound and underemployment to decline, in line with the recovery in the demand for labor and broader economic activity, ”she said.
“But we think measured unemployment is unlikely to peak before restrictions are eased, as it did last year.”
Bank governor Philip Lowe said in a statement that the RBA expects the labor market and the economy in general to recover quickly once the current lockdowns are over.
“Looking ahead, the bank’s trade liaison and job vacancy data suggest that many companies are looking to hire workers ahead of the scheduled reopening in October and November,” he said.
Despite the improvement in the labor market once the lockdowns are over, Dr Lowe warned that the bank did not expect a break in wages or inflation.
He said pressure on wages and prices across the country remained “subdued”, downplaying fears of a surge in inflation.
“While disruptions in global supply chains affect the prices of some products, their impact on the headline inflation rate remains limited,” he said.
Data from last week showed home values were rising at their fastest rate in 32 years. Dr Lowe said if prices continued to rise, turnover in some markets had started to decline.
The Board of Financial Regulators, which includes the RBA and the Australian Prudential Regulation Authority, had discussed medium-term risks to macroeconomic stability.
Dr Lowe maintained the bank’s position that interest rates were unlikely to be pushed up anytime soon.
“The board of directors (of the bank) is committed to maintaining very favorable monetary conditions to achieve a return to full employment in Australia and inflation in line with the target,” he said.
“It will not increase the cash rate until real inflation is sustainably within the target range of 2-3%. The central scenario for the economy is that this condition will not be met before 2024. “