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Free AccessNo Reaction To RBA Minutes, Some Scenarios Sketched Out
The minutes from the RBA's June meeting have given some more colour surrounding the decisions that will be made at the key July gathering, noting:
- "Regarding the 3-year yield target, the Board will consider whether to retain the April 2024 bond as the target bond or extend the target to the next maturity, the November 2024 bond. Members had previously agreed that the target of around 10 basis points would be retained. In addition, the Board had previously stated that it would not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. A key consideration for the decision regarding the yield target would be an assessment of the prospect of this condition being met some time in 2024. Members also discussed the likely effect of the decision in relation to the yield target on overall financial conditions."
- "In relation to the government bond purchase program, the Board would decide upon future government bond purchases at the July meeting ahead of the completion of the second A$100 billion of purchases in early September 2021. The options discussed included ceasing purchasing bonds in September (other than to support the yield target if necessary); repeating A$100 billion of purchases for another 6 months; scaling back the amount purchased or spreading the purchases over a longer period; and moving to an approach where the pace of the bond purchases is reviewed more frequently, based on the flow of data and the economic outlook. Key considerations for the decision in July would be the progress made towards the Board's goals for employment and inflation, and the likely effect of different options on overall financial conditions. Observing that the bond purchase program had been one of the factors underpinning the accommodative conditions necessary for the economic recovery, members thought it would be premature to consider ceasing the program."
- As you would expect there isn't much in the way of pre-committal there, although the Bank has primed participants with potential outcomes. A reminder that a fair chunk of the sell-side have switched their RBA call to a more flexible bond buying scheme, which was outlined as a potential outcome by the Bank.
- Little in the way of reaction in bond futures to the release, with YM -1.6 and XM +1.0, as the early Sydney flattening theme holds.
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