Latest monetary policy decision by the RBA - 7 September 2021

  • Prior 0.10%
  • 3-year bond yields target 0.10%
  • RBA maintains tapering plans, extends purchase period until February
  • Setback to the economic expansion is expected to be only temporary
  • Delta outbreak is expected to delay, but not derail, the recovery
  • Economy will be growing again in the December quarter
  • Expected to be back around its pre-delta path in the second half of next year
  • Much will depend on the health situation and the easing of restrictions on activity
  • Central scenario is that conditions for a rate hike will not be met before 2024
  • Full statement

This is the key passage from the statement but it doesn't tell the whole story:

The Board's 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. These bond purchases, together with the low level of the cash rate, the yield target and the funding that has been provided under the Term Funding Facility, are providing substantial and ongoing support to the Australian economy.

As much as extending its taper plan may sound dovish, they continue to keep a more optimistic (at least as much as can be) on the economic outlook as they maintain that any setback remains "temporary" and that the recovery is only "delayed".

All things considered though, this isn't exactly what they had in mind back in July but they are trying to make the most out of it at least.

The question now perhaps becomes how long are they going to kick the can down the road. It's not exactly tapering if you keep extending the purchase period now, is it?

For now, the optics is arguably what is supporting the aussie with AUD/USD trading up from 0.7440 to 0.7468 and hovering around 0.7460 currently.