(Bloomberg). — Australia’s Reserve Bank stated that it would taper its bond-buying program in 2022 at the first meeting and end it in May. This is consistent with the existing forecasts. The announcement came as policymakers presented a positive outlook on the economy. 

The RBA’s board discussed two other options for quantitative easing: it could cease purchases in February if better-than-expected progress was made toward its employment and inflation goals, according to minutes of the Dec. 7 meeting released Tuesday. If progress is slower, the third option would be to reduce taper in February then review it again in May.

“These options reflected the expectation that the economy would continue to bounce back,” the minutes said. “The emergence of the omicron variant was a new source of uncertainty, but it was not expected to derail the recovery.”

The RBA’s debate comes against the backdrop of global counterparts accelerating their winding back of stimulus to counter mounting inflation pressures. The RBA’s final decision will be announced Feb.1, the first meeting of 2022, giving policy makers time to asses the economy, with readings on inflation, the labor market and retail sales due in coming weeks.

Bank officials also stated that the risk of the recovery from the variant omicron would be lessened by February.

“Timely indicators suggested that economic activity, particularly household consumption, was recovering strongly,” the minutes showed. “Leading indicators of labor demand pointed to a strong recovery in labor market conditions in coming months.”

Before last week’s jobs data, which showed record levels of hiring in November as well as a drop in unemployment to 4.6%, the board met.

A few months ago, Governor Philip Lowe stated that any decision to end QE will not be influenced by the time of the next interest rate hike. He also said that the actions of central banks would have an effect on the RBA’s QE policy. 

The central bank reiterated today that rates will not be raised from the current record low of 0.1% until actual inflation, not forecast, is sustainably within the central bank’s 2-3% target band. 

“This will require the labor market to be tight enough to generate wages growth that is materially higher than it is currently,” the RBA said in the minutes. “This is likely to take some time and the board is prepared to be patient.”

Global monetary policy is changing and the RBA must adapt. Last week the Federal Reserve signalled that they would be speeding up their taper, and will probably increase rates in 2022 at a quicker pace.

Similar factors are playing out in Australia’s A$2.1 trillion ($1.5 trillion) economy with jobs growth surpassing all expectations, consumer spending resurgent and business confidence strong. The RBA reiterated their lower-for-longer message about inflation, which is why it remains tepid.

The omicron coronavirus variant, which is rapidly spreading, is a downside. New South Wales, the capital of state, saw a record 30557 infections Tuesday. That’s up from 2501 Monday. As state officials push ahead with an end to virus restrictions, the spike in infections comes as authorities continue to press forward.

The bank did however maintain its positive tone and noted that service industries would be receiving a boost.

“The outlook for travel and education exports had improved somewhat on account of the international border reopening earlier than previously assumed,” the minutes showed. “Education exports were expected to contribute to GDP growth over the coming years.” 

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