The RBA eschewed the signal-value of reversing the taper. My hunch is that they are worried about their market footprint and housing.
We can be pretty sure the RBA will downgrade and dump the taper. I think there’s a chance they say that YCC’s not dead, just frozen. Boosting QE to 6bn per week seems unlikely to me.
What can the RBA do? Faster QE will take RBA ownership of mid-curve ACGBs to 50%. They should consider buying Ultras and increasing the share of Semis. And rolling YCC to Nov’24.
The economy was already shedding jobs in early July. The outlook is for more weakness.
RBA minutes confirm that the decision to taper to 4bn/wk was a close run thing & set up a reversal (due to COVID downgrades) in August.
The AFR’s John Kehoe reports that the RBA would not have tapered on 6 July if they’d foreseen the lockdowns. I think the RBA will reverse that decision on 3 August. It would be good strategy to remind the market that YCC’s not dead, it’s just frozen.
COVID lockdowns have over-taken the RBA’s recent upgrade of the current assessment from ‘recovery’ to ‘expansion’. A contraction in Q3 would extend the life of QE and boost the peak-size of the RBA’s balance sheet.
How bad is the CnV19 recession going to be? March NFP was -0.5% (37th worst since 1940), and April is likely to be the worst ever (-10%). Real time measures suggest this is 5x worse than the GFC.
Another quarter of weak consumption and a decline of the ABS measure of job vacancies challenges the RBA’s conclusion that there’s no wealth effect form housing & their reliance on the lagging ABS measure of labour demand.
In this post I look at the federal election results in Qld. I first look at the two-party-preferred swing, and then at the swing in the Labor primary vote. The closer a seat is to a coal mine (particularly Adani) the lower the ALP primary vote and the larger the 2pp swing to the LNP.
The RBA cut 25bps to 1% on 2 July, delivering a rare back-to-back easing. They didn’t, however, drop the sort of hint that would suggest another cut in August.
In this post i look at the relationship between the two party preferred swing to the LNP at the last election, and find that the location of mines may explain the strength of the swing. I speculate that shyness about views on mining and climate change may account for the fact that the polls didn’t detect the mood.