Three down, three extra to go.
For mortgage holders, that was essentially the most optimistic takeaway from Michele Bullock’s press convention after the Reserve Financial institution of Australia’s determination to chop its money price for the third time this yr.
The RBA’s money price goal began the yr at 4.35% and – after strikes in February, Might and now August – it has reached 3.6%.
“We’ve become increasingly confident that inflation is on track to be in our 2-3% target range on a sustainable basis,” the RBA governor mentioned, earlier than including that the central financial institution and its board had been “determined to keep inflation down”.
These rosy inflation forecasts rely on a key assumption, or what Bullock known as the financial institution’s “best guess” about the place charges would go from right here.
That assumed path is an extra price reduce by the top of this yr, one other by the next June, after which probably yet another by the top of 2026.
Join: AU Breaking Information electronic mail
“The forecasts imply that the cash rate might need to be a bit lower than it is today to keep inflation low and stable, and employment growing, but there is still a lot of uncertainty,” she mentioned.
And whereas the route of journey for charges appears to be like clear, there was loads of proof from Bullock’s press convention that the RBA isn’t significantly satisfied when these strikes have to occur.
In July the board stunned us by not slicing its money price. However Bullock made it clear that the RBA simply wanted to tick a few bins earlier than taking the plunge.
Now, the imaginative and prescient is far blurrier. The board is taking issues “meeting by meeting”, the governor mentioned various occasions.
What would probably decide once we may get one other reduce?
She responded with a laundry listing of knowledge that the central financial institution’s coverage board considers once they make their choices.
after e-newsletter promotion
One other query: Is the money price at 3.6% a handbrake on the financial system?
Possibly, perhaps not, Bullock replied.
All of which is to say: once more, two or three extra price cuts is the financial institution’s “best guess”.
Certain, it might be good to assume the financial institution can do extra than simply guess, however financial coverage this deep right into a slicing cycle appears to be like much more like artwork than science.
For now, we must console ourselves with the prospect that rates of interest, at some stage, “might need to be a bit lower”.
Patrick Commins is Guardian Australia’s economics editor
