RBA holds as housing surge comes to fore

SDYNEY: Australia’s central bank kept its key policy instruments unchanged following the cooling of a global bond selloff and as the impact of record-low interest rates on asset markets comes into focus.

Reserve Bank of Australia (RBA) governor Philip Lowe and his board held the cash rate and three-year yield target at 0.10% and made no changes to the longer-dated bond-buying programme.

The central bank on Friday releases its semi-annual financial stability review that’s likely to hone in on lending and housing.

“Given the environment of rising housing prices and low interest rates, the bank will be monitoring trends in housing borrowing carefully, ” Lowe said in a statement. “It is important that lending standards are maintained.”

The Australian dollar was little changed after the decision and was trading at 76.47 US cents at 2:42pm in Sydney yesterday.

Australia’s house prices jumped in March by the most since 1988 as the economy’s recovery and cheap mortgages enticed buyers back into the market.

The RBA has been able to return to its regular bond-buying regime as the global reflation trade that spiked yields tempered, a turnaround accompanied by a depreciation in the local currency that will please policymakers.

Lowe is due in the months ahead to decide whether to keep the April 2024 bond as the bank’s YCC target, or roll over to the November 2024 maturity.

He reiterated in yesterday’s statement that the board will consider whether to do this later in the year.

The governor noted that the central bank’s first A$100bil (US$76.5bil or RM316.14bil) of longer-dated bond purchases is almost complete and the second programme of the same amount will begin next week.

“Beyond this, the bank is prepared to undertake further bond purchases if doing so would assist with progress towards the goals of full employment and inflation, ” he said.

Australia’s recovery has been underpinned by early suppression of Covid-19. However, isolated flare ups have prompted local lockdowns and some states to shut borders, interrupting economic activity. — Bloomberg

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