Will RBA keep teir INT. rate remain ?steemCreated with Sketch.

in #money9 years ago

There are a large number of factors that the Reserve Bank Board takes into consideration in making its interest rate decision each month, both domestic and global. Today I would like to talk about some of the global influences on domestic monetary policy.
As you are well aware, the Australian economy doesn't operate in isolation from the rest of the world. This is also true when it comes to monetary policy. While the goals of monetary policy are very much domestic, in terms of inflation and employment, the influences on the achievement of these goals are both domestic and global.
In talking about the global influences on the setting of monetary policy, I will make the probably obvious point that the policy rate here in Australia is at a historic low, in no small part because policy rates elsewhere in the world are also around historic lows.
Why are global policy rates as low as they are? Part of the explanation is that to meet their policy goals, central banks in other advanced economies have had expansionary policy settings since the start of the global financial crisis. Moreover, in the largest advanced economies, policymakers have provided further monetary stimulus through large asset purchase programs, which have seen central bank balance sheets increase significantly.
Another part of the explanation is that the neutral level of the policy rate has declined in most countries, including here in Australia. That is, the level of the policy rate where monetary policy is neither providing stimulus nor restraint is lower than it used to be. Central banks have had to set their policy rates even lower than that already lower neutral policy rate to provide the appropriate stimulus to their economies.
I will start by talking about four common global factors that have led to the expansionary monetary policy settings seen in most advanced economies for almost a decade. These four factors are present in Australia to varying degrees. I will then discuss the neutral policy rate and its decline over the past decade. I will finish with some comments on the influence of global financial factors on domestic monetary policy considerations.

Source: http://www.rba.gov.au/speeches/2017/sp-dg-2017-07-21.html

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