MNI RBA Review - August 2021: A High Bar Set For Looser Policy

EXECUTIVE SUMMARY

• The RBA's August meeting set a high bar for adopting looser policy settings as we move forwards, as the Bank wrongfooted the majority of economists and media outlets, as it refrained from reneging on/deferring its tapering call (our markets team was wrongfooted, but our policy team was correct on this matter).
• On net, the Bank is relying on a swift rebound in economic growth once the COVID situation in NSW is resolved, with this assumption rooted in previous experiences. A softer AUD is seen as a supportive factor, particularly as it is accompanied by the relatively high level of relevant commodity prices. Still, uncertainty prevails and the Bank highlighted the optionality that it wants to maintain re: the size of its bond purchases.
• RBA Governor Lowe will get a chance to refine the Bank's message when he testifies in front of the House of Representatives Standing Committee on Economics on Friday (09:00 Sydney/00:00 London). But, barring a fresh, sizeable adverse shock, it would seem that the next 'live' RBA meeting will come in November, when the Bank is set to make the next major decision about the size of its bond purchase scheme (~2 months after tapering).

Click to view the full review: RBA Review - August 2021.pdf