MNI: RBA "prepared to do more" on QE

The Reserve Bank of Australia is keeping the size of its bond purchase program under review and is "prepared to do more if necessary," minutes from the bank's last board meeting show.

Minutes from the December 1 meeting were released today and show that although the RBA believes the domestic economic recovery is under way and recent data has been "better than expected," the recovery was still dependent on "significant policy support."

At its December meeting the RBA kept the cash rate unchanged at the record low of 0.1% and re-affirmed other policy settings such as the A$100 billion program of quantitative easing for five to ten year Government bonds, and the 0.1% target yield on the Australian Government three year bond.

The bank said it would continue to monitor the effect of the bond purchases on the economy and on market functioning.

The minutes also show the bank does not expect to increase the cash rate "for at least three years".

"The bank remains committed to not increasing the cash rate until actual inflation is sustainably within the 2 to 3% target range," the minutes said. Current annual inflation is 0.7%.

The outlook for inflation was dependent on wages growth and employment gains, which would have to be "materially higher" than recent levels to have any impact on inflation.