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Ending QE Early Would Be Hawkish... Right?

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  • We expect the RBA to maintain its wait-and-see stance and announce no additional policy actions at its meeting in September. The Statement on Monetary Policy released on 6 August clarifies that the RBA is currently not in favour of policy options such as foreign exchange intervention, negative interest rates or direct central bank (i.e. monetary) financing of government budget deficits. The RBA is likely to repeat its cautious stance in the upcoming policy meeting, although it will probably continue to add the qualification that it is committed to do what it can to support jobs, incomes and businesses in Australia. In other words, the RBA should continue to suggest that it would adopt additional policy tools if the economic outlook were to worsen further.
  • The RBA is expected to maintain its economic outlook while at the same time highlighting the deterioration in the COVID-19 situation both domestically and abroad. Stage 4 restrictions have been maintained in Victoria as the number of daily deaths continues to increase. The pace of increase in the global number of COVID-19 cases is not slowing, and there are signs of a second wave spreading through some major European countries as well as South Korea. Nevertheless, the strong macroeconomic data substantiates the underlying recovery momentum. We note continued gains in jobs and retail sales in July despite the second wave of infections in Victoria. The impressive recovery in China led by industrial production and infrastructure investment should support Australia's commodities exports. We also watch the number of new confirmed COVID-19 cases in Australia to have reached a peak. We conclude that the pandemic has not worsened enough to change the RBA's economic outlook and policy stance.
MNI London Bureau | +44 0203-865-3809 |
MNI London Bureau | +44 0203-865-3809 |
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