Fundamental Updates – RBA Sticks With QE Tapering Plan (04 August 2021)
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The RBA’s decision.
During their monetary policy meeting yesterday, the Reserve Bank of Australia (RBA) kept its monetary policy unchanged, holding interest rate at 0.10% and quantitative easing (QE) at a rate of A$5 billion per week.
A little surprise.
With the recent spike in COVID cases in Australia due to the highly contagious Delta variant, the market was anticipating the RBA to announce the holding back of their QE tapering plan that was made during the previous meeting. However, the central bank stuck to its tapering plan of A$4 billion per week that will run from early September to at least mid-November.
RBA downplayed impact of virus outbreaks on economic recovery.
Although the RBA decided to stick with its QE tapering plan, it did acknowledge that the recent virus outbreaks are “interrupting the recovery and GDP is expected to decline in the September quarter”. Nonetheless, the central bank is confident that the Australian economy will rebound quickly after getting hit by the outbreaks as justified by previous occurrences.
Impact on the Australian dollar.
The Australian dollar strengthened as a result of the RBA sticking with their QE tapering plan.
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