MNI RBA Review - July 2021: Data Dependence

Executive Summary

• The RBA's move to trim its weekly bond purchases to A$4bn at the expiration of the current purchase plan in early September vs. the existing A$5bn, alongside a first review date of the new scheme set for the Bank's November meeting was at the hawkish end of expectations. The embedded optionality of the scheme was welcomed by the analytical community.
• In terms of the wider statement the RBA managed to tick more hawkish boxes than it missed. The fact that the Bank seems to be relatively sanguine re: the economic impact of the recent COVID lockdowns caught the eye.
• Elsewhere, there was a tweak to the Bank's broader forward guidance as it removed the reference to "at the earliest" surrounding the potential for a cash rate hike in 2024, which was initially seen as being indicative of at least a marginal downtick in the RBA's conviction in its guidance (although in line with the decision not to roll the 3-Year yield targeting measure over to ACGB Nov '24). RBA Governor Lowe reintroduced the "at the earliest" phraseology in his post-meeting speech, although the data dependence (and upside risks to the economic forecasts that will be produced in the August SoMP) that he underscored headlined.

Click to view the full preview: RBA Review - July 2021.pdf