Philip Lowe, the Reserve Bank of Australia’s chief, has spoken out against bond markets pricing in an earlier tightening of monetary policy, which sent the currency and yields lower, as Lowe repeated that interest rates would most likely remain at the current level until at least 2024.
Low reiterated that the RBA does not share the same views as market pricings implied expectations of possible increases in cash rate as soon as next year and 2023. Within recent weeks, the Australian central bank has upped their bond buying as they battled against rising yields which were driven by reflation trades sweeping global markets. The RBA defended their 0.10% yield target and level of cash rate as they wanted to ease markets.
Lowe repeated again that the RBA’s inflation-targeting regime would need an actual reading between the 2-3% target, not just a forecasted reading, before considering moving rates. This would most likely require a growth above 3% for wages stated Lowe, stating that current levels are at a record low of 1.4%.
The governor also spoke about the bank’s intentions of discussing whether they would extend their quantitative easing programme. The $100B programme is in place to target longer-dates securities, and in February it was announced that another $100B will be used when the programme is due to expire mid-April.
Lowe’s comments arrived at the same time as financial markets began pricing rate hikes by major central banks next year and 2023, supported by strong economic data. This sent bond yields rising, as Lowe pushed down on these factors, which could be a heavy weight on the AUD.
Currently, the AUD/USD is down 0.07% on the session.