Australia Holds Base Interest Rate at 0.1%... Quantitative Easing Scale to Reduce After September

Philip Lowe, Governor of the Reserve Bank of Australia [Photo by AP Yonhap News]

[Asia Economy Reporter Park Byung-hee] The Reserve Bank of Australia (RBA) announced that it will keep the benchmark interest rate at 0.1% but reduce the scale of asset purchases in the third round of quantitative easing starting after September.

After concluding its monetary policy meeting on the 6th, the RBA decided to maintain the benchmark interest rate at 0.1%. It also reaffirmed its previous stance that there is no need to change the 0.1% benchmark rate until 2024. The RBA emphasized that the 0.1% benchmark rate is necessary to raise wages and prices.

The RBA also stated that it will continue its quantitative easing policy.

However, it announced that the scale of asset purchases in the third round of quantitative easing, starting after September, will be reduced compared to the second round. While the second round involved weekly asset purchases of 5 billion Australian dollars, the third round will reduce this to 4 billion Australian dollars.

In a statement released after the monetary policy meeting, RBA Governor Philip Lowe emphasized, "The economy is in a transition from the recovery phase to the expansion phase," and added, "We will continue to maintain supportive policies."

He also noted that recent economic indicators show a positive trend, but short-term uncertainties due to COVID-19 remain. He added that the RBA maintains its previous forecast that it will not reach its inflation and employment targets by 2024.

The RBA lowered the benchmark interest rate three times last year, bringing it down to the current historic low of 0.1%. In November last year, it introduced a quantitative easing policy involving the purchase of bonds worth 100 billion Australian dollars over six months. After the first round of quantitative easing ended in April this year, the RBA extended the period and announced a second round of quantitative easing to purchase an additional 100 billion Australian dollars worth of assets.