VIEW: ANZ: The Next Step: Extension Of TFF/QE Beyond Mid-2021

ANZ think it unlikely "that the RBA is done on the policy front, even with the economic recovery seemingly running ahead of expectations. At the very least, we think the TFF and QE will be extended beyond their current end dates, unless the major central banks extensively scale back their programs, which seems unlikely. More modest adjustments by other central banks may allow the RBA to taper the size of its programs even as it extends their duration. Though in the near term, the pressure could be the other way if the ECB, BoE and Fed respond to the economic risk posed by rising COVID-19 cases. The RBA has scope to further strengthen its forward guidance, perhaps by adopting the 'average' inflation approach of the Fed. We think the RBA will only entertain such a shift if the economic recovery fails to gain traction. Extending purchases to private sector assets seems extremely unlikely, as do negative interest rates. A sharp lift in household debt off the back of a strong housing recovery could see tighter macro-prudential controls settings. But most likely not until 2022 at the earliest."