Chris Joye with the note:
The RBA has provided clear signalling that in July it will move to a new form of open-ended quantitative easing (QE) at the current run-rate of $5 billion of bond purchases each week, which will be periodically reviewed. This will avoid the policy rigidity of static, five monthly QE programs at $100 billion a pop, and allow the RBA to smoothly glide towards a tapering into 2022, as we and most other forecasters expected. If the data is very positive, the RBA can taper in 2022. If it is negative, the RBA can maintain the current bond purchase pace. It will also mean that the extended $5 billion per week of purchases between mid-September and mid-December plus the eventual tapering into 2022 will involve the RBA likely acquiring more than $100 billion of additional bonds. At its July board meeting, we believe the RBA will de facto taper through not extending its 0.1%, 3-year yield curve target from April 2024 to the November 2024 bond, and via the expiry of its $200 billion term funding facility on 30 June.
The RBA likes to condition policy changes via media signals and has done so for decades, which allows for a smoother transmission mechanism. One of the problems with using media proxies is that the messages can get mangled in translation. We see this all the time.
