Australia CB Holds Key Rate; Lifts QE

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Australia’s central bank left its key interest rate unchanged on Tuesday and raised the size of the asset purchase programme.

The board decided to maintain the targets of 10 basis points for the cash rate and the yield on the 3-year Australian Government bond, as well as the parameters of the Term Funding Facility.

But the board decided to buy an additional A$100 billion of bonds issued by the Australian Government and states and territories when the current bond purchase program is completed in mid April. These additional purchases will be at the current rate of A$5 billion a week.

The bank is not expecting to raise its interest rates until 2024.

Policymakers expect the economic recovery to continue, with the central scenario being for GDP to grow by 3.5 percent over both 2021 and 2022. GDP is expected to return to its end-2019 level by the middle of this year.

Both inflation and wages growth are forecast to pick up, but to do so only gradually, with both remaining below 2 percent over the next couple of years, the board said. In underlying terms, inflation is expected to be 1.25 percent over 2021 and 1.5 percent over 2022.


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