What is the outlook for tapering as well as interest rate revision timelines?
Team Veye | 27 Sep 2021
Australian economy had started picking up with considerable momentum just before the Delta outbreak. In the June quarter, GDP was up by 0.7 per cent and by approximately 10 per cent over the year. With a strengthening labour market and unemployment rate falling below 5 per cent, business investment was gradually picking up.
When The Reserve Bank of Australia met last week to decide the nation's official cash rate, it chose to keep it on hold at record-low levels of 0.10 per cent as the country continued to battle the COVID-19 pandemic.
The central bank had long advised that it will not increase the cash rate until inflation rises to a sustainable target of two to three per cent. Presently inflation was around 1.75 per cent.
In his monetary statement, RBA Governor Philip Lowe noted the impact extended COVID-19 lockdowns were having on large parts of the country. He expected GDP to decline materially in the September quarter and the unemployment rate moving higher over the coming months.
It is expected that setback to the economic expansion is only temporary and the Delta outbreak could delay, but not derail, the recovery. With increased vaccination rates and the easing of restrictions, the economy should bounce back.
However, The Board's decision to extend the bond purchases at $4 billion a week until at least February 2022 could be a pointer to the delay in the economic recovery and the increased uncertainty associated with the Delta outbreak.
The US Federal Reserve’s FOMC held its meeting earlier this week to take decisions on its monetary policy. US Federal Reserve Chair Jerome Powell’s statement that the US central bank could begin scaling back asset purchases in November and complete the process by mid-2022, was expected by market participants. It is widely believed that global markets can weather a gradual tightening in Federal Reserve monetary policy.
Veye Pty Ltd(ABN 58 623 120 865), holds (AFSL No. 523157 ). All information provided by Veye Pty Ltd through its website, reports, and newsletters is general financial product advice only and should not be considered a personal recommendation to buy or sell any asset or security. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation, or needs. You should look at the Product Disclosure Statement or other offer document associated with the security or product before making a decision on acquiring the security or product. You can refer to our Terms & Conditions and Financial Services Guide for more information. Any recommendation contained herein may not be suitable for all investors as it does not take into account your personal financial needs or investment objectives. Although Veye takes the utmost care to ensure accuracy of the content and that the information is gathered and processed from reliable resources, we strongly recommend that you seek professional advice from your financial advisor or stockbroker before making any investment decision based on any of our recommendations. All the information we share represents our views on the date of publishing as stocks are subject to real time changes and therefore may change without notice. Please remember that investments can go up and down and past performance is not necessarily indicative of future returns. We request our readers not to interpret our reports as direct recommendations. To the extent permitted by law, Veye Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss, or data corruption) (as mentioned on the website www.veye.com.au), and confirms that the employees and/or associates of Veye Pty Ltd do not hold positions in any of the financial products covered on the website on the date of publishing reports. Veye Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services.