VIEW: WSJ's Glynn: RBA Likely To Be Split On QE Tapering As COVID Rages On

Late on Monday the WSJ's RBA watcher, James Glynn, noted that "the Reserve Bank of Australia suspending plans to taper its government bond-buying program in September is now a 50/50 proposition, with the central bank already moving to pulp the upbeat economic forecasts it published just weeks ago. The debate around the RBA's board table on September 7 over the scheduled reduction in weekly government bond purchases is set to be vigorous as surging COVID-19 cases shutter key capitals, fuelling recession fears."

• "The recent hesitancy to put tapering on hold is due to several factors: Topping the list is the job market's underlying resilience. Unemployment slipped below 5% in June and July, exceeding expectations and supporting the idea that the economy can snap back quickly when lockdowns end. There is also the view that any attempt to add to demand across the economy by tinkering with bond buying would be of limited benefit at a time when mobility and spending are effectively paralyzed. The RBA is still hopeful that pent-up demand will spark a consumer spending surge when lockdowns are eased, lifting economic output in the fourth quarter and fending off the ugly prospect of two consecutive quarters of contraction. The central bank is also looking at other countries that have eased lockdowns, concluding that consumers are adaptable and things do bounce back."
• "One option is for the central bank to taper in September while also signaling that it will keep buying bonds at the reduced rate beyond November. That would convey the message that it is prepared to buy more bonds over time than markets had expected."