VIEW: CBA: RBA To End Bond Purchases In February

CBA writes “the Minutes today noted that, “if better‑than‑expected progress towards the Board's goals was made, then the third option (i.e. to cease bond purchases in mid‑February) would become more appropriate”.

• “There are two key economic publications to come before the February 2022 Board meeting that will feed into the RBA’s decision on the bond buying program: (i) the December labour force survey (due 20 January); and (ii) the Q421 CPI (due 25 January). “
• “We expect both pieces of data to print stronger than the RBA’s forecasts from the November 2021 Statement on Monetary Policy. That is, the data will indeed indicate that ‘better‑than‑expected progress towards the Board's goals’ has been made.”
• “As a result, we shift our call on the RBA’s bond buying program to them announcing at the February Board meeting an end to purchases altogether in mid‑February 2022 (previously we had expected a taper to $A2bn per week and an end to the program in May 2022). This decision will be supported by the US FOMC’s announcement last week to double the pace of tapering, which means the FOMC’s bond purchase program will now end in March 2022.“
• “The Omicron variant poses a risk to the economic outlook which could result in the RBA continuing to purchase bonds from mid‑February through to May 2022. But for now that is a risk and not our central scenario.”