RBA "Reaffirms" Cash Rate, Bond Yield Targets

• Published on
• 07 Apr 2020, 03:03 PM

The Reserve Bank of Australia published its monthly monetary policy decision today. Below are the highlights:

1. An interesting change in language. Instead of stating it is leaving the cash rate and the 3-year government bond yield target "unchanged", the RBA used "reaffirmed" to convey no change.
2. While the 3-year government bond yield is now around the target, the RBA has signalled it will continue to do bond-buying. However the RBA also signalled purchases would taper, that is become "smaller and less frequent", if conditions continue to improve.
3. The RBA plans to reduce the size of its daily open market operations.
4.On Financial Stability, the RBA said the financial system is resilient. "It is well capitalised and in a strong liquidity position, with these financial buffers available to be drawn down if required to support the economy."
5.The RBA didn't address the fact that the overnight rate is at least 7bps below the cash rate target. It is likely to watch the overnight market closely, and make any adjustment in future if the gap still persists.