More QE on the horizon

RBA Governor Lowe announced this week that the Bank will keep rates on hold until actual inflation, rather than expected inflation, was sustainably in the 2-3% target band. And he also argued that the size of the RBA’s balance sheet influences the exchange rate and the yield curve. This supports our long held view that the RBA will launch additional QE. We still expect the Bank to cut interest rates to 0.1% and announce bond purchases aimed at lowering longer dated bond yields at its next meeting in November.