It was one of several unconventional monetary policy tools used by the Reserve Bank of Australia in the depths of the COVID-19 pandemic, but a new review has found it unlikely to be used again.

The three-year bond yield target was introduced at an emergency RBA board meeting in mid-March 2020, along with a cut in the benchmark interest rate to a then-record low of 0.25 percent.

The aim was to bring market interest rates in line with the cash rate as closely as possible by buying bonds on the open market when needed and providing borrowers with low-interest loans, such as loans. B. three-year fixed-rate mortgages, was helped.

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“(The review) concludes that the yield target has reduced funding costs and supported lending,” RBA Governor Philip Lowe said at an American Chamber of Commerce in Australia event in Sydney.

“In doing so, it has helped the economy recover from the pandemic.”

Subsequently, the return target was lowered to 0.1 percent in November 2020 in line with a cash rate cut.

“After the introduction of the target, lending rates fell significantly, particularly fixed rates,” said Dr. Lion.

“Indeed, banks cut interest rates on their three-year fixed-rate loans well below the new floating rate for the first time, and the fixed-rate portion of new home loans rose to new highs.”

The target was discontinued in November 2021 as the economy had made a sustained recovery from the recession a year earlier.

However, the review found that the policy ended in a disorderly fashion as market views on the economic outlook shifted, causing some reputational damage to the central bank.

“In hindsight, it can be argued that there was too much focus on the downside risks to the economy and the need to insure against them, and too little on the possibility that things could turn out better than expected,” said Dr. Lion.

“Earlier communication from the bank could have eased the situation, although the demise of a target that was losing credibility would likely always result in some volatility in market prices.”

The review found that the likelihood that the Board would use a rate of return target again in the future is remote, but recognizes that the use of a rate of return target could be appropriate in extreme circumstances.

The board is currently reviewing all of its unconventional measures that have been applied during the pandemic.

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