At its meeting today, the Reserve Bank of Australia Board decided to:
- maintain the cash rate target at 10 basis points and the interest rate on Exchange Settlement balances at zero per cent
- continue to purchase government securities at the rate of $4 billion a week until at least mid February 2022
- discontinue the target of 10 basis points for the April 2024 Australian Government bond.
In the statement released after the meeting the RBA Governor Philip Lowe said: "The decision to discontinue the yield target reflects the improvement in the economy and the earlier-than-expected progress towards the inflation target.
"Given that other market interest rates have moved in response to the increased likelihood of higher inflation and lower unemployment, the effectiveness of the yield target in holding down the general structure of interest rates in Australia has diminished."
The RBA moved its calendar-based forward guidance on when the cash rate might increase.
Governor Lowe said: "The Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. This will require the labour market to be tight enough to generate wages growth that is materially higher than it is currently. This is likely to take some time.
"The Board is prepared to be patient, with the central forecast being for underlying inflation to be no higher than 2½ per cent at the end of 2023 and for only a gradual increase in wages growth."
The Bank had previously indicated that its inflation pre-condition for rate hikes was unlikely to be met before 2024.