Some have argued the episode dented the RBA’s credibility, and the central bank today said this was an “open question,” arguing other central banks had also underestimated the strength of the economic recovery clancyyeates
The Reserve Bank’s messy move last year to dump a policy aimed at repressing bond yields to nearly zero led to market dislocation and damaged the central bank’s reputation, a review has found.
By late last year, however, the target lost credibility in the financial markets as bond investors bet inflation would force the RBA to raise interest rates earlier than expected. Yields blew out to far higher than the 0.1 per cent target, hitting a peak of 0.78 per cent. In a review of the program, the RBA said the policy had succeeded in driving down funding costs across the economy, pointing to the fall in fixed rates, and a jump in housing and business lending.