RBA eyeing formal change towards unwinding unconventional policy in July – BofA

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Analysts at Bank of America Global Research (BofA) provides insights into the Reserve Bank of Australia’s (RBA) July 6 monetary policy meeting.

Key quotes

“The RBA will update policy guidance at the 6 July Board meeting. Governor Lowe will hold a press conference, as was the case when yield curve control was unveiled last March and quantitative easing (QE) was introduced in November.” 

“So this is a formal change of direction. It seems almost certain the 3-year yield target will not be extended beyond Apr-2024, but the RBA now looks likely to adopt a more flexible and data-dependent approach to extending QE.”

“Considerable stimulus will likely remain in place. A more open-ended third round to QE is more likely to commence at the current pace of AUD5bn per week where RBA purchases would reach AUD60bn after 3 months. An extension of QE would help to keep net ACGB supply negative in the new fiscal year and help to temper 10yr swap spread tightening,”

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