RBA may end QE in April – Capital Economics

Marcel Thieliant, Senior Australia & New Zealand Economist at Captial Economics, believes that the Reserve Bank of Australia (QE) may unwind its asset purchases program in April.  

Key quotes

“While the Reserve Bank of Australia will present more upbeat forecasts for GDP growth, inflation and the labor market at its meeting on Tuesday 2nd February, we suspect it will still sound dovish.

Even so, we think that the rapid recovery in the labor market will convince the Bank to end QE in April.

The RBA has now bought $48bn in government bonds under its Bond Purchase Program. If it keeps buying $5bn per week, it will hit the $100bn target by the middle of April.

As such, the Bank will have to announce whether to extend the programme no later than the meeting on 6th April.

The consensus is that the Bank will reduce its weekly asset purchases from $5bn now to less than $2bn from April. We think the Bank may go even further and end QE altogether.”