Did RBA Action Show They Lost Control in Markets? | Italian Bond Sell-Off an Issue for ECB

We’re on a heavy schedule this week with major market moving releases. While most people are focusing on the Bank of England and the US Federal Reserve, the Reserve Bank of Australia wasn’t one to ignore.

In fact, as Jim Reid of Deutsche Bank wrote earlier in the week: “I’m going to open the market section this morning with a line I don’t think I’ve written in 27 years of market commentary and probably won’t again. And it’s not about England thrashing Australia at cricket on Saturday. Yes, the most important event of the week could be the RBA meeting tomorrow.”

Here are the key points of what they ended up announcing:

1. Maintaining the cash rate target at 10 basis points.
2. Continuing their government securities purchases at $4 billion a week until at least mid February next year.
3. Stopping the target of 10 basis points for the April 2024 Australian Government Bond.

This means the RBA is getting rid of its policy of yield curve control, meaning it’s doing what we’re expecting most major central banks to do and tightening its policy. On that topic, their statement said:

“The decision to discontinue the yield target reflects the improvement in the economy and the earlier-than-expected progress towards the inflation target. Given that other market interest rates have moved in response to the increased likelihood of…