RBA Tracker

Largely uneventful

The muted market reaction to today’s communication from the RBA and the Board says it all.

The key messages remained the same, notably that underlying inflation remains too high, a mildly restrictive stance of monetary policy is expected to persist, and that uncertainty about the outlook remains elevated.

The Board noted that the Bank’s key economic forecasts were “broadly unchanged” from August.

Directionally, however, changes to the forecasts were instructive: the outlooks for growth in domestic demand and GDP were revised down a little; the unemployment rate profile was lifted modestly; and forecasts for wages growth and underlying inflation were trimmed.

On inflation, the Bank expects quarterly trimmed mean inflation to slow to around the top of the 2-3% target on an annualised basis from Q4 to Q2 next year. It is only thereafter that underlying inflation is forecast to more meaningfully shift lower towards the middle of the Bank’s inflation target.

If the Bank’s inflation forecasts turn out to be reasonably accurate, then the chances of policy easing prior to mid-2025 appear relatively slim. Indeed, that is what markets are currently pricing, which also underpins the Bank’s forecasts.

Updated outlook for the RBA cash rate