Quantitative easing – creating money that is then pumped into the economy through the purchase of assets such as government bonds – has been a key part of a suite of measures put in place by the RBA to deal with COVID.
The bank holds $272 billion of federal government debt plus another $16.1 billion of NSW debt,$14.2 billion of Victorian debt and $18.4 billion of Queensland debt. Ahead of the pandemic,the bank held just $16 billion in debt.
The quantitative easing program has helped keep interest rates on government debt at record lows while also pumping money into the broader economy. The bank sliced the program to $4 billion a week worth of debt purchases at its November meeting and since then the nation’s jobless rate has fallen to 4.2 per cent.
While quantitative easing has supported the economy,the bank’s interest rate settings have had the most direct impact on consumers and businesses.
The official cash rate was sliced to a record low of 0.1 per cent in November 2020 with financial markets now expecting the RBA to start lifting it in early May. Private sector economists believe the bank will wait a little longer,probably August or September.
Such a move would be at odds with what the bank had been expecting as recently as November.
Late last year,RBA governor Philip Lowe said market pricing of a 2022 rate rise seemed an over-reaction to then inflationary pressures,describing such a move as “extremely unlikely”.