Since March 19, the RBA's policy stance has centred on yield curve control, targeting 0.25% on 3-year Commonwealth bonds to complement its forward guidance that the cash rate would not be increased "until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2-3 per cent target band". At the time of the May meeting, the RBA had purchased $50.7bn in Commonwealth and semi-government bonds. Over the past 4 weeks, it has added just $0.6bn in semi-government debt to that total. Meanwhile, drawings under the Bank's Term Funding Facility are reported to have lifted by $1.7bn over the inter-meeting period to $5.84bn.
At last week's Senate Select Committee on COVID-19 Governor Lowe commented that in his view this package of measures was working well and that he did not see the need to do any more at the moment, though the Bank could step up its bond purchases if additional monetary support was required. However, the main emphasis from Governer Lowe was around the pre-eminence of fiscal policy support in the current environment.
The main change to economic conditions since the May meeting has been the gradual reopening of the economy in response to the announcement of PM Scott Morrison's three-stage plan. The states and territories are now gradually easing restrictions, though this is occurring in an unsynchronised manner across the nation. Governor Lowe said last week that the data appeared to be indicating that economic activity was tracking a little ahead of the Bank's baseline forecast presented in May's Statement on Monetary Policy, but that there was still "a lot of challenges coming down the track", so any further insight provided on these themes will be of interest. April's labour market report will also feature prominently in the Board's discussions today following the loss of 594.3k jobs in the month, a rise in the unemployment rate to 6.2% and record highs on underemployment (13.7%) and underutilisation (19.9%). The focus, however, appears to be on hours worked (-9.2% in April), with Governor Lowe outlining last week that he expects to see further weakness in May ahead of an improvement in June.
