James Morley

The RBA has signalled that it will keep the policy rate at its stated effective lower bound of 0.25 per cent until “progress is being made towards full employment and it is confident that inflation will be sustainably within the 2-3 per cent target band”. This forward guidance is shored up by the yield curve control measure to keep the 3-year government bond rate close to 0.25 per cent. At the same time, the RBA has forecasted that the COVID-19 crisis will lead to year-on-year deflation in the June quarter for the first time in decades. Given this, it would be helpful to provide more concrete commitments not to raise rates too soon just because the unemployment rate will eventually fall from high levels and to explain what would make the RBA confident that inflation will return sustainably to its target range. Linking not just maintaining the current policy rate, but also the continuation of yield curve control to various publicly-available measures of inflation expectations could help provide a clear indication of what it would take for the RBA to consider unwinding its current policies and make sure public expectations about when it will do so not run ahead of what the RBA actually intends.

Outcome date: 
Monday 04 May 2020
Current rate: 
12 months: 
6 months: 

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