Major central banks around the world are still buying billions of dollars in bonds each week
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The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price has slipped into the red. Following earlier day gains, shares are down 0.36% at the time of writing, to $27.88.
The big four bank made headlines today when its top economist predicted the Reserve Bank of Australia (RBA) will keep on with its bond-buying program longer than previously announced.
Why is ANZ forecasting a delay to tapering?
Aside from slashing the official cash rate to a record low of 0.10%, the RBA also engaged in a series of bond purchases to ensure borrowing rates remain low during these challenging times for businesses and workers alike.
On 3 November 2020, the central bank announced a $100 billion bond purchase program to lower longer-term yields. The RBA followed up on 2 February 2021 by announcing it would purchase an additional $100 billion of government bonds.
On 6 July 2021, the RBA said it would continue to buy $4 billion of government bonds per week until “at least” 11 November.
Despite the “at least” language, this led many analysts to predict the central bank would look to begin tapering its bond purchases in November.
But with the Delta variant driving a huge spike in new Covid infections, sending much of New South Wales and Victoria into extended lockdowns and impacting states and territories across the nation, ANZ believes the RBA will need to hold off on any monetary tightening plans until 2022.
In a statement unlikely to be impacting the ANZ share price today, David Plank, head of Australian economics for ANZ, said (quoted by the Australian Financial Review):
We think the RBA will announce a delay in the planned reduction of its weekly bond purchases next week. An alternative choice is to continue with taper, but delay the next review until February. We think a simple delay is much easier to communicate than this alternative.
If he’s right that should offer a significant tailwind for equities, which tend to perform well in easy money environments.
ANZ share price snapshot
The ANZ share price has gained 21% year-to-date. This compares to a gain of 12% on the S&P/ASX 200 Index (ASX: XJO) so far in 2021.
Over the past month the ANZ share price is down 1%.
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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.