Coolabah: RBA cash rate should be -3% to -4% hence QE to infinity

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In November, Australia entered uncharted territory as the RBA announced the introduction of Quantitative Easing (QE) via $100 billion of purchases of 5- to 10-year government bonds. The goal of this program is to alleviate upward pressure on long-term Australian government bond yields and the Aussie dollar, supporting growth, employment and inflation.

Last week, the RBA leapt even further into this unexplored territory by committing to the purchase of another $100 billion of Commonwealth and State government bonds. Welcome to QE 2.0.

On the back of the RBA’s surprising announcement, which Coolabah Capital Investments’ correctly predicted, Chief Macro Strategist Kieran Davies explains what QE 2.0 means for markets, and why QE 1.0 was not substantial enough.

Davies also details why the team at Coolabah believe this will not be the last QE announcement based on a new research paper that shows the RBA’s cash rate should be negative 3-4% right now, which implies QE 3.0 and QE 4.0 are looming. 

 

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