Australia’s central bank left its cash rate and asset purchase programme unchanged and indicated that it will not raise the rate until inflation returns to the target range.
The policy board of the Reserve Bank of Australia headed by Governor Philip Lowe decided on Tuesday to hold its cash rate at a record low of 0.10 percent.
The central bank maintained the target yield on the 3-year Australian government bond at around 0.1 percent and the parameters of the Term Funding Facility and the bond purchase program.
“The board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 percent target range. For this to occur, wages growth will have to be materially higher than it is currently,” the bank said.
This will require significant gains in employment and a return to a tight labor market. The board does not expect these conditions to be met until 2024 at the earliest, it added.
The RBA said that the economic recovery is expected to continue and the central scenario is 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.
The economy is still operating with considerable spare capacity and the unemployment rate remains higher than it has been for some years, the central bank said.
The unemployment rate is expected to be around 6 percent at the end of this year and 5.5 percent at the end of 2022.
In underlying terms, inflation is seen at 1.25 percent over 2021 and 1.5 percent over 2022.