AUD and GBP targeted by Central Bank decisions

This week the Central Banks of Australia and the United Kingdom, decide on their monetary policy. In this sense, the Reserve Bank of Australia, reported its decision in the last hours.

In general terms, the official statement does not report changes during the month of August, since the RBA will maintain the interest rate at 0.10%.

Still, the RBA will continue to buy government assets at the rate of $ 5 billion a week through early September. After that, it will maintain a purchase rate of $ 4 billion per week.

In the RBA statement, they highlighted a better than expected economic recovery.

However, the recent outbreaks of the Delta variant will interrupt the pace of recovery and GDP is expected to decline in the September quarter. With this, they also expect effects on the labor market. It has recovered faster than expected, and the unemployment rate fell further to 4.9% in June.

Regarding the RBA’s expectations, they expect a gradual recovery in both wage growth and core inflation. This is subject to the evolution of the spread of the virus and the expectations of vaccination of the population against the covid, affecting border openings and economic activity.

Given this, they will maintain flexibility when making decisions about the asset purchase policy and the interest rate, in accordance with inflationary and full employment objectives.

Regarding the expectations of the decisions that the Bank of England will make, no resounding changes are projected. The decision is contextualized in a scenario of containment of the new Delta variant, which adds optimism to the markets due to the positive economic results. For this reason, it is expected that the evaluation that they will carry out regarding the economic performance will be optimistic and, based on this, there will be indications about upcoming changes.

Monetary policy and asset purchase policy is expected to continue and it is still uncertain when they will begin to reduce it. Regarding the interest rate, no changes are expected for it, remaining at 0.1%. For the decision-making committee, withdrawing the stimulus too soon would be an even greater risk. However, there are already debates about when to implement changes or maintain it due to changes in inflation, which is currently at 2.5%.