RBA tapering to delay rate hikes

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An excellent note from UBS. My own view remains that the next move in rates is down as commodities crash, macroprudential stalls housing and border reopening kills wages. 

How many rate hikes will the RBA deliver? This time also depends on liquidity

The RBA note Australia’s recovery out of the pandemic is stronger than anyone expected, leading markets to focus on the RBA’s future tightening. We still expect the RBA at their July meeting will: 1) end TFF; 2) not extend the 3-year yield target; & 3) taper QE. We also still expect the RBA will abandon the yield target in 2022 and open the way to rate hikes in 2023. But we also think ‘this time is different’, with the pace of hikes also depending on what the RBA does with all the cash/liquidity injected since Mar-20. This is a new factor for investors to consider, given the RBA didn’t previously aggressively expand their balance sheet to provide monetary policy stimulus.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.