RBA delivered a cautious message – UOB

Lee Sue Ann, Economist at UOB Group, comments on the latest RBA meeting (September 7).

Key Takeaways

“Financial markets were focused on the RBA’s decision on its Quantitative Easing (QE) policy at this meeting. In August, the RBA had “considered the case for delaying” tapering but confirmed its July’s decision to scale back bond purchases from AUD5bn per month to AUD4bn from early September.”

“Indeed, in its accompanying statement today, the RBA stated that ‘the decision to extend the bond purchases at $4 billion a week until at least February 2022 reflects the delay in the economic recovery and the increased uncertainty associated with the Delta outbreak. The Board will continue to review the bond purchase program in light of economic conditions and the health situation, and their implications for the expected progress towards full employment and the inflation target’.”

“The Australian economy managed to avoid a double-dip recession in the second quarter… But the economic outlook for the coming months is uncertain and depends on how the health situation and the containment measures evolve. We expect GDP to fall by around 3% q/q in 3Q21 before rebounding in 4Q21... At this juncture, our view is for the economy to play catch up so that the level of GDP is broadly similar to our previous set of forecasts of 4.3% in 2021 and 3.2% in 2022. We still expect that the first cash rate rise will be in early 2024.”