RBA Expected to Enlarge Bond Purchase Program Next Month
The Reserve Bank of Australia (RBA) has decided to maintain its dovish position on monetary policy. As everyone expected, it kept policy settings unchanged. But analysts think that the RBA will broaden its bond purchase program by another $100 billion next month.
That the Reserve Bank of Australia did not change interest rates and parameters of its bond purchase program carries some positive implications. By its decision, the RBA confirms that the labor market has tightened faster than expected. It also acknowledges that there were reports of labor shortages in some parts of Australia.
On a negative side, the Reserve Bank of Australia admitted that the coronavirus outbreak prevents it from feeling certain about the future development of the Australian economy.
Analysts’ prediction for the month ahead is that the Reserve Bank of Australia will enlarge its bond purchase program by another $100 billion. They also foresee that the RBA will keep the weekly pace of purchases unchanged at $5 billion.
Analysts expect that the RBA will begin to taper its asset purchases from the beginning of 2022. It will also start increasing rates by the end of 2023, they think. In analysts’ opinion, the Reserve Bank of Australia will overall show more dovish behavior than investors would wish and more dovish than the markets have priced.
This will have a serious impact on the Australian dollar’s price dynamic. The AUD will remain unchanged at around $0.78 over the next few years, analysts suggest.
