Guidance = Lower For Longer

The RBA's forward guidance notes that "given the outlook for both employment and inflation, monetary and fiscal support will be required for some time. For its part, the Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. 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. Given the outlook, the Board is not expecting to increase the cash rate for at least three years. The Board will keep the size of the bond purchase program under review, particularly in light of the evolving outlook for jobs and inflation. The Board is prepared to do more if necessary."

• The focus on actual as opposed to expected outcomes, which became apparent in recent rounds of communique, pointed to a lower for longer approach from the RBA (as noted in our preview,) this was firmed up by the RBA's explicit expectations that it will not "increase the cash rate for at least three years."
• The latest move from the RBA re: the interest rate payable on E/S surplus balances being set at 0.00% (an outside view ahead of the decision, more looked for 0.01% or 0.05%) means that any further easing will likely be focused on the bond purchase side of the equation, given the Bank's continued push back vs. negative rates.