A couple of quick comments on the Reserve Bank of Australia outlook, from a Bloomberg event.
Royal Bank of Canada:
The RBA "has a lot of options before it would head down that negative rate path":
- could first turn to strengthening its forward guidance,
- stepping-up bond buying,
- lowering its three-year yield target
- or extending targets further out the curve
But:
- "what we've learned from the past few months, you probably never say never and if there was, for whatever reasons, a global push toward negative rates, then there probably would be pressure on the RBA in that regard."
RBC base case
- 0.25% cash rate for at least three years
- economic recovery likely to be very modest
- elevated levels of unemployment for some time
---
UBS'
RBA outlook:
- "We think that the RBA is done for the time being" (buying bonds is what UBS is referring to)
But:
- "If the economy doesn't turn up, turns weaker, or if the market is unable to support all the bonds that will be issued in the coming months, then the RBA will come back to the market in a more regular fashion"
- "But for now the curve is steep and is likely to remain steep."
