RBA’s Lowe Rejects QE Scenario
The global economy has weakened considerably and many major central banks have turned dovish, cutting interest rates several times. The European Central Bank started another QE (quantitative easing) programme this month.
The Reserve Bank of Australia has cut interest rates three times already. But, RBA chairman Lowe rejects a QE scenario in Australia.
- 0.25% is the effective lower bound for rates
- QE could include purchase of state government bonds
- Expects employment growth to be slow but still be reasonable
- Not particularly worried by rising house prices at the moment
- A long way from QE scenario happening
- There are a lot of positives in the economy
- The important thing is to get inflation moving in the right direction
- It is going to take a long time for wages to translate to inflation
Lowe does mention QE and the option of buying government bonds, but he also states that “QE is a long way from happening”. But, he also states that 20% might be coming soon. Markets are anticipating a 25 bps rate cut next year, but if things deteriorate, we might have more than one cut and even QE. Although, hopes are that the partial trade deal should improve the economic situation globally and particularly for Australia, since China is the main export market for Australia.
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