The RBA is preparing the market for changes to its monetary policy activities tomorrow as it takes initial steps towards removing emergency stimulus measures. However the overall tone is likely to remain colorful and more so despite the uncertainty caused by a continuing increase in new cases of COVID19 and blockages in Sydney.
The three main points of interest will be as follows.
- The RBA is not expected to extend its three-year “performance target” from the April 2024 bond to the November 2024 bond. A decision is widely expected and will represent a gradual tightening of policy that seems appropriate after the rapid improvement of the economy.
- Previous leadership will remain cunning. Specifically, the RBA will reiterate that the conditions for raising interest rates including sustainable inflation between the target rate of 2 to 3 percent are unlikely to be met until 2024 at the earliest.
- QE will continue after the current $ 100 billion program ends in September, but perhaps at a slower pace of $ 75 billion every six months and with more flexibility.
The RBA’s framework including the strict preconditions it has set, including achieving 3% wage growth, and sustainable inflation in its 2-3% target group are likely to keep the RBA behind the pack between the central banks of developed markets. to start walking.
Music to the ears to the ASX200, after it ended Final Year 2021 last week showing an index return of 27.8%, the strongest since Financial Year 2007.
In recent weeks there has been a strengthening, as ASX200 has closed four of the past five weeks ~ 10 points on both sides of 7300. As such the view remains unchanged as we prefer to buy weakness to high support in the 7100/7000 support area. .