The Reserve Bank’s $350 billion bond buying program will likely wrap up in May, governor Philip Lowe said on Thursday.
In a speech addressing the CPA Australia Riverina Forum in Wagga Wagga, Mr Lowe said that the future of the bond buying program would be decided at the board’s next meeting in February, with preliminary discussions already said to have taken place.
According to Mr Lowe, the most likely scenario would see the bank begin to wind back the program in February before finishing it in May. This scenario, he noted, is broadly consistent with the bank’s forecasts in November for employment and inflation.
However, the governor stressed that no decision has been made yet.
“Much will depend upon the news we receive between now and when we meet in February,” Mr Lowe said.
“Importantly, we will receive further readings on inflation and the strength of the labour market and learn about the strength of spending in the economy over the summer. We will also learn more about the actions of other central banks and the effects of the Omicron variant,” he noted.
Mr Lowe outlined three options for 2022.
The first option includes tapering the bond purchases from the current rate of $4 billion a week, before ending the program in May; the second, tapering further before a review in May; and the third, ceasing bond purchases altogether in February.
All three options are based on the premise that the economy does not experience another serious setback.
Touching also on the cash rate, Mr Lowe reiterated that the bank “will not increase the cash rate until actual inflation is sustainably in the 2-3 per cent target range”.
“We are still a fair way from that point. In our central scenario, the condition for an increase in the cash rate will not be met next year,” he said.
“It is likely to take time for that condition to be met and the board is prepared to be patient.”
Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.
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