RBA outpaces Fed with QE tapering: JPMAM
The Reserve Bank of Australia (RBA) is six months ahead of the Federal Reserve, according to J.P. Morgan Asset Management (JPMAM), meaning rates could rise as early as 18 months’ time.
Speaking on a webinar, head of fixed income Bob Michele, said he could see the RBA raising rates by early 2023.
Central banks in Australia and the US had the most scope, he said, to progress down a “path of normalisation” in monetary policy compared to the European Central Bank or the Bank of Japan.
“We have believed for a while that Australia would taper and begin rate normalisation and we are already seeing that.
“Australia is roughly six months ahead of the US in terms of dialogue and intent so I expect we will see rates begin to rise in 18 months.”
At its latest monetary policy meeting, the RBA agreed to taper weekly bond purchases from $5 billion to $4 billion until mid-November 2021 but it expected rates would be kept at the record low of 0.1% until 2024.
Michele said the US had indicated it would begin to think about tapering in September with the first moves being made in early 2022. This would coincide with the Fed’s annual Jackson Hole symposium at the end of August.
“In September, we expect the Fed to be able to say they have a tapering plan to begin in January of around $10-15 billion per month and they will bring purchases of Treasury and mortgage-backed securities down to zero. Then there would be rate normalisation in the second half of 2023 in 25bps hikes.”
However, if he was Fed chair Jay Powell, Michele said he would be looking to begin tapering as soon as possible.
“I would start tapering today,” he said. “It should start now while the economy is in recovery.”
AUTHOR
Laura Dew
Recommended for you
Financial advisers nervous about the liquidity of private markets funds for their retail clients are the target of fund managers launching semi-liquid products which offer greater flexibility and redemptions.
Former Pendal head of multi-asset Michael Blayney has been appointed as a member of the investment committee at specialist managed accounts provider Evidentia Group.
Australian Ethical has seen its funds under management surpass $13 billion in the latest quarter, thanks to retail and wholesale net flows of $173 million but a transition project by Mercer affected superannuation flows.
A salary guide has unpacked the salaries earned in various asset classes, with managing directors in one space earning north of $500,000.
