The Reserve Bank of Australia is expected to roll back its quantitative easing while maintaining its current yield target bond when it meets next month to take “tactical decisions, the former board member John Edwards said early Wednesday.
Key quotes
“It’s something they’ve got to do at some point and things have gone far more favorably than their earlier forecasts.”
“My sense is they may take this opportunity to dismantle some of the elements of their structure” on longer-dated bond purchases.
“To commit to it really does lock them in a bit on the timing of moving the cash rate,” Edwards said of a moving to the later bond.
“It’s an unnecessary risk because they can at any point between now and April ’24 announce an extension if things go unfavorably.”
“A surge in property prices fuelled by very low borrowing costs might also factor into the decision.”
“The evident switch to fixed-rate borrowing for home purchases is something the RBA wouldn’t really welcome. That provides another argument for not prolonging the three-year fixed-rate target.”
“Fed policy could end up relieving some pressure on RBA.”
Market reaction
AUD/USD is little changed around 0.7745, unfazed by the RBA’s tapering expectations, US-Sino tensions and Melbourne’s easing of restrictions news.
The fx space remains a mixed bag and broadly subdued, awaiting the all-important US CPI data for fresh directional impetus.
