I posted yesterday on the RBA Minutes to the December meeting. A focus is what the RBA will do with its Qe program.
From yesterday:
The minutes did not add a lot of new information as Governor Lowe had spoken since the Dec. Meeting. The minutes outlined the 3 options on RBA bond-buying (QE) that Lowe covered in his speech, links here:
- RBA Governor Lowe repeats that in no hurry to raise interest rates
- RBA Gov. Lowe says not his job to target high house prices, higher rates not the solution
but in a nutshell these are:
- reduce bond buying in February and end in May
- end in February
- reduce in February, review again in May
That first option is consistent with the RBA’s central forecasts. Interestingly the latest calls from Australia’s ‘big four’ banks have three tipping option 2 above (an end to bond purchases in Feb.) while one (Westpac) are nominating the first option (end in May).
Westpac have a brief piece out today on the next meeting outlining their thoughts on taper or ending QE:
Whether it decides to taper its purchases with a view to ceasing the program altogether in May or ceases the program entirely in February will depend on progress towards its inflation and full employment objectives.
The taper option is consistent with the Bank’s forecasts at its November Board meeting but the issue is whether the revised forecasts presented to the Board in February will indicate further progress. Much will depend on the next inflation and employment reports, while developments around Omicron will also be a very significant factor in the decision.
As discussed, both Westpac and the RBA currently believe that Omicron will not derail the recovery although the next month will determine the extent of the delay and uncertainty.
Westpac currently favours the taper option but will review that call before the meeting in light of the key upcoming developments, highlighted by the degree of disruption caused by Omicron.
RBA Governor Lowe
