RBA extension
There's been a fair amount of speculation as to whether the Reserve Bank of Australia would taper its purchase of government securities, or not.
At today's Meeting the Board confirmed that it would continue purchases - but only at a rate of $4 billion per week - though it would continue to do so until at least February 2022.
So that's considered to be something of a neutral response, as it's effectively confirming an extension of the bond purchase program until February (and possibly longer, if required).
The economy is still expected to rebound solidly in due course, but the timing looks to be pushed out until the middle of next year due to the ongoing lockdowns in New South Wales, Victoria, and the ACT.
Even this could be considered an upbeat reading of the economy.
My 'gut feel' is that the Delta variant of the coronavirus is going to cause ongoing disruptions in various guises for a long time to come, especially given the persistently high case numbers in countries where vaccination rates are far further advanced than those prevailing around Australia.
For example, the UK has dished out well over 90 million vaccination doses to date, but virus case numbers are still punching above 40,000 on some days.
James Foster has kindly plotted some potential RBA tapering numbers into a graphical format, where he explains in a more sophisticated style how the extension of bond purchases until at least February 2022 might be interpreted:
Housing watch
The RBA noted that housing turnover has declined as transactions are impacted by lockdowns - especially in Victoria - although prices generally continue to rise, which will warrant further monitoring.
The cash rate will thus be held at 0.10 per cent until inflation is back sustainably in the 2 to 3 per cent target range, which is unlikely to be until 2024 at the earliest.
There's plenty of talk about 'when' mortgage rates go higher in Australia, yet mortgage rates can often be much lower in the UK, or elsewhere in Europe.
Indeed, over a quarter of mortgages in Denmark now have a negative mortgage rate - while deposit rates are also sharply negative - which is a statistic to make your head spin! (h/t Cameron Murray).
