Christopher Kent: From QE to QT - The next phase in the Reserve Bank's Bond Purchase Program

Speech by Mr Christopher Kent, Assistant Governor (Financial Markets) of the Reserve Bank of Australia, at the KangaNews DCM Summit, Sydney, 23 May 2022. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

Central bank speech  | 
23 May 2022


It is great to be here in person. Last year at this event, I discussed the Bank's Term Funding Facility (TFF). Today, I'm going to focus on the Bank's bond purchase program.

At its meeting earlier this month, as well as raising the cash rate target, the Board decided not to reinvest the proceeds from bonds as they mature from the Bank's portfolio. This signals the next phase in the bond purchase program. The initial phase in which the Bank built up its stock of bond holdings is often referred to as 'quantitative easing', or QE for short. That phase ended in February this year. We have now entered the phase known as 'quantitative tightening', or QT. By allowing our bond holdings to gradually diminish over time as they mature, the initial stimulatory effects of those holdings – namely, downward pressure on government bond yields and the Australian dollar exchange rate – will gradually unwind.

In my presentation today, I'll explain the reasoning behind the decision to begin QT. I'll then discuss some of the implications of QT for financial conditions, and explore what it means for the Bank's balance sheet and the operation of monetary policy through the cash rate. But first, I'll briefly recap the QE phase of the program.