VIEW: CBA Expect The RBA To Reverse Taper Call In Sep

CBA note that "at the September Board meeting we expect the RBA to recognise that the hit to GDP and employment will be a lot more significant than they anticipated in August. And we expect them to acknowledge that 'living with the virus' will be a new experience for Australia that will create more economic challenges, at least initially, than they previously expected. The appropriate policy response is therefore not to proceed with the taper."

• "To be clear, the impact on the economy of buying bonds at a rate of $A4bn per week as opposed to $A5bn a week is negligible. And we understand the RBA's reluctance to reverse course. But the optics of tapering when the national economy is going through a huge negative shock with a highly uncertain future do not look good. The path of least regret should be to keep the pace of bond buying steady, particularly given debt issuance will step up due to the negative economic shock."
• "We do not subscribe, however, to the idea that the RBA will scale up its bond purchases (i.e. shift from $A5bn to $A6bn per week). The decision not to proceed with the taper will be a significant enough deviation from the announcement in August. And the signalling that scaling up carries would detract from the RBA's messaging around the medium-term outlook for the economy."
• "As such, our working assumption is that the Board will simply announce in September that they will continue to purchase bonds at the current rate of $A5bn per week through to November."