MNI RBA Review - December 2021: No Real Omicron Worry

EXECUTIVE SUMMARY

• The RBA left its broader monetary policy settings unchanged at the end of today’s meeting, matching the unanimous set of expectations in place.
• The lack of worry regarding the omicron COVID strain provided the most notable outright passage when it came to statement, with the Bank clearly relaxed when it comes to the economic threat posed by the latest COVID mutation. Indeed, in the wake of the Q321 GDP data, which wasn’t as bad as expected, the Bank rolled forward its expectation for when the Australian economy will return to the pre-Delta growth path and sounded more upbeat in its commentary surrounding the labour market.
• The central tenants of the Bank’s forward guidance remained as they were, although the timeframe whereby the Bank expects to achieve the attainment of its inflation goal was repositioned outside of the key final paragraph. Some viewed this as a hawkish shift. We don’t believe the rejig represents as hawkish a switch up as those parties, with the points addressed elsewhere in the statement.
• The Bank also confirmed that it will reconsider bond purchases at its next meeting, in February, reaffirming the well-known factors of its decision-making process on that front. Consensus currently looks for the RBA to cut its bond purchases down to A$2bn/week from the current A$4bn/week in February.

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