Reserve Bank of Australia owns the line; Nervousness over house prices
By James Glynn
SYDNEY – The Reserve Bank of Australia kept interest rates unchanged at a policy meeting on Tuesday, but signaled growing concerns about soaring house prices.
The RBA kept its official policy rate and three-year government bond yield target at 0.10%, as expected by economists. The central element of the central bank’s policy stance, the indication that interest rates will not be raised until 2024, has remained unchanged.
“The board will not increase the cash rate until real inflation is between 2% and 3% sustainably. For this to happen, wage growth will need to be significantly higher than it is. currently is, ”RBA Governor Philip Lowe said in a statement.
“This will require significant job gains and a return to a tight labor market. The Council does not expect these conditions to be met until 2024 at the earliest,” Lowe said.
The RBA has stuck to its policies, but the pressure may increase later this year to more fully recognize the rapid pace of the economy’s recovery, which has been evidenced by a surge in job creation. ‘jobs.
The ANZ reported earlier Tuesday that job vacancies were at their highest level in 12 years in March, data which is consistent with recent large drops in the unemployment rate.
The jump in job openings also comes at a critical time for the economy, as the government withdrew its wage subsidy program – key support for the economy during the pandemic – in late March. The decision still has the potential to send many people out of work.
Record interest rates are also fueling a problem in the housing market, with house prices rising at their fastest pace since 1988 in March. Economists are now forecasting sharp increases in house prices this year, which could fuel concerns about household debt levels, bank lending standards and the overall stability of the financial sector.
“With rising house prices and low interest rates, the Bank will closely monitor mortgage trends and it is important that lending standards are maintained,” Mr. Lowe said.
The RBA will release its latest Financial Stability Review on Friday and its comments on house prices will be closely watched. Many economists expect the banking regulator to tighten the criteria for granting mortgages in the coming months if the frenzy in the housing market does not abate.
The RBA has already extended its bond buying program until the end of September, with some economists expecting further extensions as the central bank struggles to bring the economy back to full employment.
Write to James Glynn at [email protected]
(END) Dow Jones Newswires
April 06, 2021 01:08 ET (05:08 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.