The Reserve Bank of Australia announced on Tuesday it will end its quantitative easing purchases in February following a review of the actions of other central banks, the functioning of Australia’s bond market and the progress towards the goals of full employment and target inflation.
The RBA governor, Philip Lowe, flagged that while faster-than-expected progress has been made towards the RBA’s goals, the end of its quantitative easing program of buying up debt did not signal the cash rate would soon be raised.
“The board judged that now was the right time to end the bond purchase program,” Mr Lowe said.
Since the start of the pandemic, the RBA’s balance sheet has more than tripled to around $640 billion.
“The board will consider the issue of the reinvestment of the proceeds of future bond maturities at its meeting in May,” Mr Lowe noted.
The RBA left its cash rate unchanged at the record low 0.1 per cent where it has sat since November 2021.
“Ceasing purchases under the bond purchase program does not imply a near-term increase in interest rates,” Mr Lowe said.
“As the board has stated previously, it will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range,” he noted.
“While inflation has picked up, it is too early to conclude that it is sustainably within the target band.”
