RBA Decision December 2021
At their December meeting, the Reserve Bank of Australia (RBA) maintained their policy settings – ie. the cash rate target at 0.10% and will continue to purchase government bonds (print money) at a rate of $4 billion a week until at least mid-February 2022.
Key highlights of their statement included:
- Don’t expect new virus variants to derail the recovery
- Strong recovery in the labour market, but they only expect wages growth to be gradual
- Inflation has increased, but remains low, with inflationary pressures not widespread across the economy
- House prices have risen strongly but the value of housing loan commitments has declined
- The fall in the Aussie dollar along with accommodative financial conditions are assisting the recovery effort
- The Bank will re-assess their bond buying (money printing) program mid-February.
Key takeouts from the statement are that:
- The RBA remains patient with regard to their accommodative policy stance in order to meet their objectives of full employment and inflation consistently between 2-3%
- Australian inflationary pressures are less than they are in many other countries, which includes modest wage growth
- The board will not increase the cash rate until actual inflation is sustainably (ie. more than a single quarterly print) within 2-3%.
KEY IMPLICATIONS
RBA policy remains supportive of the economic recovery effort and supportive of asset price growth, with no major implications for markets at this stage outside of government bonds where we think investors are too aggressively pricing in RBA rate increases in the next 12 months.
As always, let us know if you have any questions.