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The Reserve Bank of Australia expanded its quantitative easing program by AUD100 billion despite upgrading its labour market forecast and said it will maintain current record low interest rates "until 2024 at the earliest."
Although the recovery was "well under way and has been stronger than was earlier expected," the economy needed ongoing support, the RBA said as it left its cash rate unchanged at 0.10% on Tuesday.
While the rate decision was widely expected, the move to double the size of its QE program announced last year came as a surprise. The first AUD100- billion QE program, set to end in mid-April, will now be extended with the central bank continuing to purchase AUD5 billion in longer dated Commonwealth and state government debt each week.
On interest rates, the RBA appeared to clarify its forward guidance in December when it said rates would stay at current levels for three years. For the first time, the bank said it expects rates to be maintained until 2024.
The RBA said it will not increase the cash rate "until actual inflation is sustainably within," the 2-3% target range. The current rate is 0.9%.
The RBA forecast that GDP would grow by 3.5% over both 2021 and 2022, and was expected to return to its end-2019 level by the middle of this year. It also upgraded its labour market forecast, with unemployment expected to fall to 6% by year's end from 6.6% currently, despite noting that the flagship government fiscal program, the AUD86-billion JobKeeper scheme, was due to finish at the end of March.
There will be more about the RBA's outlook in Friday's quarterly Statement on Monetary Policy, and in Wednesday's speech by Governor Philip Lowe.