RBA Review - September 2020: Off Guard

Off Guard

The Reserve Bank of Australia (RBA) left its headline monetary policy settings, namely its cash rate and 3-Year government bond yield targets, unchanged, but its statement managed to provide several sources of interest, going against the grain of broader expectations, which looked for a very sanguine affair.

Key points listed below:

• All in all, September's meeting did little to shake the monetary landscape.
• Yes, the TFF tweak came ahead of the time that most had pencilled in, but at least some form of an extension was widely expected.
• The language surrounding the A$ provided little fresh information, but was a more forceful way for the Bank to highlight that it will not lean against the wind if currency moves are driven by fundamentals.
• Finally, the alteration in the guidance paragraph is perhaps dovish at the margin, but the Bank had already outlined potential methods that it could employ to ease it its already very loose monetary settings.
• Most believe that an upscaling of ACGB purchases would be its first port of call, and the September decision has done little to alter this. We already knew that the Bank was willing to do more on the easing front, if required, but is hesitant to do so. It will look to maintain a healthy amount of liquidity in the system (E/S surpluses are well above historical norms, but shy of the record seen in April), which will keep the cash rate well through target, as has been the case in recent months.

Please click here for the full PDF.

RBA Review - September 2020.pdf