Will ASX 200 shares be rocked by RBA taper talk tomorrow?

The RBA interest rate meeting tomorrow could be more exciting for ASX investors than usual.

ASX 200 shares RBA taper quantitative easing represented by letters QE sitting on piles of cash

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If the wall or worry wasn't already high enough for S&P/ASX 200 Index shares, speculation about what the Reserve Bank of Australia (RBA) will say about tapering is adding to the angst.

The RBA indicated in previous meetings that it will scale down its purchases of government bonds.

Economists are divided on whether our central bank will follow through at a time when the COVID-19 delta strain is playing havoc with the economy.

Risk of taper tantrum to hit ASX 200 shares

The purchase of government bonds is part of the RBA's quantitative easing (QE) program. QE has injected massive liquidity into the financial system and pushed ASX 200 shares to record highs.

Any talk of tapering the bond purchases could heighten any bouts of volatility on the market.

And it appears the RBA will be forced to say something about its QE program when the board meets tomorrow for their monthly meeting to decide on interest rates. The RBA has essentially reached its target to buy $200 billion in federal and state bonds.

Economists divided on QE tapering

RBA Governor Philip Lowe explicated said in previous monthly meetings that the central bank will lower bond purchases to $4 billion a week from $5 billion.

The economists at three of the big four ASX banks believe the RBA will defer the taper, at a minimum, reported the Australian Financial Review.

These banks as the Australia and New Zealand Banking GrpLtd (ASX: ANZ), Westpac Banking Corp (ASX: WBC) and Commonwealth Bank of Australia (ASX: CBA).

ASX 200 shares to get $1bn booster shot: Westpac

Westpac is going a step further. It reckons QE could be increased to $6 billion a week as delta shuts down two of our biggest states.

Nearly all experts are bracing for a contraction in the Australian economy for the September quarter. This complicates the RBA's task of striking the right balance in deciding how much support is too much.

Balancing act

National Australia Bank Ltd. (ASX: NAB) is the only one of the big ASX banks that believes the RBA will keep to its earlier promise.

If the country reopens as we close in to the 80% vaccination rate, Australia's GDP will probably stage a strong rebound in the December quarter.

"If they delay then it will be about managing downside risks," the AFR quoted ANZ head of Australian economics David Plank as saying.

"If they don't it will be because of the positive forecast for 2022. Of course, historically relying on their forecasts to guide policy hasn't gone well for the RBA – which is why they have shifted to looking at what is actually happening for the cash rate moves at least."

Tomorrow's RBA meeting might be that much more exciting for ASX investors.

Motley Fool contributor Brendon Lau owns shares of Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, National Australia Bank Limited, and Westpac Banking Corporation. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

A man analyses stockmarket graph on his computer.
52-Week Lows

The Guzman Y Gomez share price hit a 52-week low this week. Is it a buy?

Has this stock lost its spice or is it set to rebound?

Read more »

Man sitting in a plane looking through a window and working on a laptop.
Broker Notes

Should you buy Qantas shares before reporting season? Here's what Macquarie recommends

We look at Macquarie’s expectations for the surging Qantas share price in FY 2026.

Read more »

Contented looking man leans back in his chair at his desk and smiles.
Share Market News

5 things to watch on the ASX 200 on Thursday

Here's what to expect on the local market today.

Read more »

A set of scales with a bag of money balanced against a timer, indicating growth versus value shares
Opinions

Which ASX sector offers the best value heading into earnings season?

I think one sector is particularly compelling.

Read more »

Green stock market graph.
Share Gainers

Here are the top 10 ASX 200 shares today

It was one for the history books today.

Read more »

Person holding a blue chip.
Blue Chip Shares

4 ASX 200 blue-chip shares to hold but not buy: experts

These blue-chips are worth holding if you already own them, but are too expensive for new investors to buy.

Read more »

A bricklayer peeps over the top of a brick wall he is laying with a level measuring tool on top.
Broker Notes

Are Brickworks shares a buy, hold or sell ahead of earnings season?

Brokers have been weighing property gains, US headwinds, and merger impacts to form a view.

Read more »

A man in his office leans back in his chair with his hands behind his head looking out his window at the city, sitting back and relaxed, confident in his ASX share investments for the long term.
Broker Notes

Top brokers name 3 ASX shares to buy today

Here's what brokers are recommending as buys this week.

Read more »