VIEW: RBC's RBA Outlook

RBC expect the "RBA to lay the groundwork for the next stage of unconventional measures next week... It may well adopt a recent similar line to its dollar bloc Canadian cousin that purchases "will be adjusted as required" if "it gains confidence in the recovery". This will hint at tapering when the current A$100bn program ends in early May but the RBA may stop short of nominating the size of a likely QE extension next week… By Mar/Apr we expect more QE detail from the RBA with a likely extension of ~A$50bn over 6 months to Oct taking weekly purchases down to around $2bn, a greater shift towards semi purchases vs ACGBs (at least 30/70 from 20/80) and another TFF extension by a smaller 1% of assets. As we move into Q3, the end of the extended QE program of A$50bn will be coming into sight and the RBA is likely to start signalling the end of QE. YCC will remain at 0.1% but the language will begin to morph into a 2y target and forward adjusted accordingly. A stronger synchronised global growth from mid-2021 should emerge in the background. Communication will remain tricky as the RBA stresses still accommodative conditions for some time. Markets may react skittishly to the prospect of a "taper", but this would still be adding to the size of the RBA's balance sheet at a time when overall system liquidity is already very high. Be prepared for a pickup in volatility."