The Reserve Bank of Australia is optimistic that the spread of the Omicron variant will not derail the country's ongoing economic recovery, allowing it the flexibility to conclude quantitative easing early if activity data remains positive.
The RBA Board remained committed to keeping interest rates at a record low of 0.1%, but was evaluating how and when to wind down its A$4 billion ($2.84 billion) in weekly bond purchases, according to minutes from its December 7 policy meeting.
"Members noticed that the Australian economy was swiftly recovering after the growth interruption caused by the Delta variant outbreak," according to the minutes released on Tuesday.
"The Omicron variant's emergence was a new source of concern, but it wasn't expected to derail the recovery."
Bond buying might be extended to May at the same or reduced rate, or it could be stopped entirely in February, according to options to be discussed at the next Board meeting in February. The outcome would be determined by the state of the economy, with data on jobs, inflation, and spending being particularly important.
Since the meeting, employment numbers for November have surpassed all forecasts, with a gain of 366,100 jobs and a significant drop in the unemployment rate to 4.6%.
Given persistent supply constraints and high energy prices, inflation data for Q4, which is coming in late January, is also expected to be strong.
Many market economists believe the Board will decide to stop buying bonds in February as a result of this strength. "The RBA is expected to stop QE in February, with minimal need for the programme given that unemployment is at 4.6% and the US Federal Reserve is expected to end QE by March," according to NAB.