RBA Keeps MonPol Settings Unch; No BackTrack On QE As Fiscal Providing Support

By Sophia Rodrigues

(Sydney, August 3, 2021)—The Reserve Bank of Australia left its monetary policy settings unchanged, including its decision to taper bond-buying to a weekly rate of A$4 billion after early September to at least mid-November.

The RBA’s decision to not backtrack on its bond-buying announcement was against market consensus but in line with CB-Intel’s view that there will be no change.

Here are the stories CB-Intel published in the run-up to Tuesday’s board meeting:

Analysis: RBA Backtrack On QE Unlikely As Easy Setting Uncompromised On Current Path

Analysis: RBA Upping Bond Buys, Extend Yld Target To Nov 2024 Highly Unlikely

Insight: RBA Likely To Stick To Sep Bond-Buying Taper Plan Despite Lockdowns

The RBA acknowledged there is “significant” disruption to the economy from the lockdowns but this is “short-term” and there is welcome support being provided by the Australian government and the state and territory governments.

In other words, fiscal policy is the go-to policy for such events, while monetary policy is continuing with the substantial support it is providing.

The RBA said substantial support is being provided by the low level of the cash rate, the bond purchase program, the yield target and the ongoing funding that has been provided under the Term Funding Facility in the face of lockdowns in parts of the country and the expected resumption of the economic expansion.

The RBA “remains committed to maintaining highly accommodative monetary conditions to support a return to full employment in Australia and inflation consistent with the target,” the statement said.

The RBA said it will maintain its flexible approach to the rate of bond purchases and will continue to review it in light of economic conditions and the health situation, and their implications for the expected progress towards full employment and the inflation target.

There was no change to forward guidance that the cash rate will not be raised before 2024.

--Contact: Sophia@centralbankintel.com