VIEW: Westpac: Look For Open Ended QE

Ahead of the RBA's November decision Westpac's Bill Evans believes that "the Board will announce a change in its bond purchase program from ensuring the smooth functioning of the bond market and ensuring that the 3 year bond rate holds at the target rate to a more general role of purchasing Australian government bonds and semi government bonds, across the curve, including maturities in the 5-10 year range. We had not envisaged the Board setting a specific quantity target for the purchase program. It is already setting a price target for the 3-year rate. Fixing both price and quantity may lead to unexpected difficulties down the track. Markets seem to differ, expecting a total purchase program and a weekly "timetable" for the purchases. We cannot be sure whether such a policy approach will be taken. My view is that when you are uncertain about a particular nuance of policy then you should forecast what you think would be the best approach. With markets expecting a specific volume target, the announcement of an open-ended commitment might cause market disappointment with a potential lift in market yields and the AUD. If I was making the decision I would value flexibility over a possible short term overreaction."