Review of Bond Purchase Program: BPP Could Be Used Again

Today’s RBA’s Review of the Bond Purchase Program (BPP) found that its policy measures were important in driving the economic recovery from the pandemic and that a BPP or yield target could be used again if needed. Key conclusions included:

• The BPP and other monetary policy measures boosted confidence and shifted the whole rates structure down.
• Given BPP was one part of the easing of monetary policy, it is difficult to isolate the effects of it alone.
• Estimates show that the BPP lowered bond yields but not by as much as overseas studies had shown.
• Government bond yields fell around the time the BPP was initially announced.
• The RBA has decided to increase diligence around scenario analysis when setting policy, especially where unconventional tools are used.
• The report concludes that unconventional policy measures should only be used in “extreme circumstances” and the cash rate has been “employed to the full extent possible.”
• There were significant although difficult to measure benefits from the BPP to government finances.
• The last of the purchased bonds matures in 2033.

Deputy Governor Bullock will discuss this review at her speech today (1200AEST).

Review of bank’s forward guidance will published later this year.