GSFM’s Stephen Miller writes for Investor Daily’s ‘Analysis’ column:
The governor announced the RBA board’s decision to maintain and extend the comprehensive array of measures announced back in November, including a further $100 billion in QE bond purchases in the five to 10-year maturity range. The RBA is keeping the “pedal to the metal”. Moreover, Governor Lowe has indicated that will be the case for some time with conditions for any contemplation of an increase in the cash rate from its current levels unlikely “to be met until 2024 at the earliest.”
In his National Press Club address following the RBA board meeting, the governor made it clear that historically high levels of monetary accommodation, including the extension of the QE program, were motivated by a desire to avoid an unwelcome movement in the Australian dollar.
He noted that: “[i]n terms of other central banks, most have recently announced extensions of their bond purchase programs, many running until at least the end of this year. Given this, if we were to cease bond purchases in April, it is likely that there would be unwelcome upward pressure on the exchange rate.”
Such commentary is a confirmation that the world’s central banks are playing a game of “competitive devaluation” – a “currency cage match”, even if they are less than candid in acknowledging explicitly that the exchange rate is a key transmission tool for monetary policy.