Since last Thursday,the bank has spent $10 billion buying government bonds after interest rates on these started to rise to uncomfortable levels. The Australian dollar also appreciated,moving above US80¢ in a development that also caused concerns for the RBA.
The increase in global interest rates has been driven in part by predictions of a rise in inflation due to the $US1.9 trillion ($2.45 trillion) stimulus plan being put in place by the new Biden administration in the United States.
But RBA governor Philip Lowe,who said the bank would buy even more government debt “if necessary”,argued there were few signs of an inflation rise in Australia that would require higher interest rates.
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He said inflation had to be within the RBA’s 2 to 3 per cent target band,adding this was unlikely until at least 2024.
“For this to occur,wages growth will have to be materially higher than it is currently. This will require significant gains in employment and a return to a tight labour market,” he said.
The bankcut official interest rates to a then-record low of 0.75 per cent before the coronavirus outbreak in a bid to drive down unemployment and lift wages growth. Since then,unemployment has climbed to 6.4 per cent and wages growth has slumped to a record low of 1.4 per cent.