Some economists see potential for RBA U-turn on rates
RBA officials are grappling with economic uncertainty, prompting speculation that rate cuts could come sooner than expected as forecasts and data evolve.
Whenever a Reserve Bank official has spoken publicly or to the media recently, they’ve been anxious to emphasise the uncertainty surrounding their current tranche of forecasts.
The latest to follow this pattern was RBA chief economist Sarah Hunter, in a speech on Wednesday morning. She repeatedly highlighted “uncertainty” as a key feature of the outlook and noted that the central bank has already been caught off guard by some of what is happening in the economy. Monetary policy watchers will recall similar warnings from both Governor Michele Bullock and her deputy Andrew Hauser in recent weeks.
Some economists believe this wavering, along with repeated assurances that the central bank will act in line with the data, could suggest the RBA board is ready to change tack more swiftly to surprises in the numbers than in the past. Could this hyperawareness awareness of forecasting flaws mean they’re primed to move earlier than expected on rates?
Commonwealth Bank head of Australian economics Gareth Aird thinks it’s possible, especially as the RBA appears to be more data-dependent than it has been in the past. “As a result, we believe the Board will be more reactive to near-term data than is generally the case,” he said in an analysis.
