Latest monetary policy decision by the RBA - 3 August 2021

  • Prior 0.10%
  • 3-year bond yields target 0.10%
  • No change to QE/tapering stance
  • To purchase bonds at A$5 billion per week until early September
  • Before switching to A$4 billion per week until at least mid-November
  • Recent virus outbreak interrupting recovery and GDP expected to decline in Q3
  • Experience to date suggests that once contained, the economy bounces back quickly
  • Underlying inflation remains low
  • To maintain a flexible approach to the rate of bond purchases
  • Program will continue to be reviewed in light of economic, health situation
  • Does not expect to raise cash rate until 2024 at the earliest
  • Full statement

The aussie has jumped on the release here as the RBA sticks with its tapering plan from before and offers little reason/concern to shift that stance for the time being.

This passage here shows how the RBA is viewing the situation at the moment:

"The experience to date has been that once virus outbreaks are contained, the economy bounces back quickly. Prior to the current virus outbreaks, the Australian economy had considerable momentum and it is still expected to grow strongly again next year. The economy is benefiting from significant additional policy support and the vaccination program will also assist with the recovery."

That said, they did include some new wording in the forward guidance in case they actually have to make a change to QE/tapering moving forward:

"The Board will maintain its flexible approach to the rate of bond purchases. The program will continue to be reviewed in light of economic conditions and the health situation, and their implications for the expected progress towards full employment and the inflation target."

In essence, the RBA did not adopt a rather "safe than sorry" approach but is sticking with what it judges to be appropriate for the economy if the virus situation gets under control in the weeks ahead. If not, only then might they backpaddle.

AUD/USD has moved up from 0.7365 to 0.7405 currently, nearing last week's highs @ 0.7410-13. Meanwhile, AUD/NZD has pared losses to 1.0560 from 1.0530.