Uncertainty impacts Australia’s c. bank rate decision

The Reserve Bank of Australia (RBA), acknowledged significant uncertainty in its economic forecasts on Monday, which has influenced its decision to maintain current interest rates.

Deputy Governor Andrew Hauser, speaking in Brisbane, noted that inflation has remained persistent, partly due to lower-than-expected spare capacity in the economy.

The RBA forecasts core inflation, currently at 3.9 per cent, will only return to its target range of 2–3 per cent by the end of 2025.

Hauser highlighted the challenges of forecasting amidst such uncertainty, emphasising that predictions can be fraught with error.

The RBA has kept its cash rate at 4.35 per cent since November, up from 0.1 per cent during the pandemic, aiming to control inflation while supporting employment.

Despite some calls for higher rates, the RBA’s cautious stance suggests a possible rate cut early next year, with market expectations shifting towards easing by year-end.

Attribution: Reuters