Australia’s central bank is concerned that actively selling down bonds bought during the pandemic could compromise future efforts to stimulate the economy via quantitative easing, documents released under a Freedom of Information Act request by Bloomberg News showed.
(Bloomberg) — Australia’s central bank is concerned that actively selling down bonds bought during the pandemic could compromise future efforts to stimulate the economy via quantitative easing, documents released under a Freedom of Information Act request by Bloomberg News showed.
“That’s because the effect of those purchases on bond yields and the exchange rate would arguably be lessened if the market were to anticipate sales of holdings next time around,” Assistant Governor Chris Kent said at a workshop held at the Netherlands central bank in March.
The previously unpublished speech at the De Nederlandsche Bank also showed Kent is concerned that active QT could complicate the task of future issuance — as had “arguably occurred” in New Zealand.
Kent also said in the address that active QT ran against “our desire for the bond purchase program to stay at arm’s length from the government.”
The assistant governor’s speech was the sole document provided among 18 uncovered in the Bloomberg FOI request. The remainder were refused by the Reserve Bank. These included a paper presented to the RBA board at its May 2 meeting titled: “Reviewing the Approach to Quantitative Tightening.”
Other documents discussing QT that were held back included questions and answers exchanged with a foreign central bank and messages with an RBA business liaison contact.
The RBA said in minutes of its May meeting that the rate-setting board discussed active QT and would revisit the question after the maturing of a large part of its Term Funding Facility on Sept. 30.
That suggests active QT will be back on the agenda at the Oct. 3 meeting.
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