‘Not ruling in or out anything’: RBA boss on rate cuts
Reserve Bank governor Michele Bullock has refused to rule out more interest rate hikes, as warned inflation remained stubbornly high.
RBA board members opted to leave interest rates steady at 4.35 per cent on Tuesday, after the bank’s first meeting of 2024.
But it was another close call, with Bullock fronting the media for her first post-meeting briefing shortly afterwards to warn that inflation was hurting everyone.
The bank knew many Australians were doing it tough, but inflation was a “big reason” for that, Bullock said.
“We have made good progress, absolutely we have made good progress, but the job is not done,” she said.
She reiterated the central bank’s forecast that inflation will return to the 2-3 per cent range in 2025, and the midpoint in 2026.
Economists had broadly expected no change in the official cash rate on Tuesday, following a promising run of data, including a weaker-than-expected inflation print, muted spending numbers and signs of a softening jobs market.
With the 4.25 percentage points of monetary policy tightening since May 2022 clearly at work to cool the economy and bring down inflation, talk has turned to the timing of rate cuts.
After the meeting, Bullock would not be drawn on whether cuts were on the horizon, saying the risks were evenly balanced between the potential for hikes or cuts in 2024.
“We are not ruling in or out anything,” she said.
“We are focused on bringing inflation down, we still think the risks are balanced.”
Indeed APAC economist Callam Pickering said mortgage relief could come later this year if inflation continued to ease.
“Inflation continues to drop and there is a solid chance that core inflation returns to the RBA’s inflation target this year,” he said.
“Rate cuts in the second half of the year are suddenly a distinct possibility.”
Yet the board said there was still a chance more interest rate hikes could be needed, though Bullock’s account of the economy was broadly more optimistic than her last communications back in December.
“The board expects that it will be some time yet before inflation is sustainably in the target range,” it said in a statement.
“The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks, and a further increase in interest rates cannot be ruled out.”
Interest rate cuts may still be a while away, with Oxford Australia head of macroeconomic forecasting Sean Langcake saying the RBA’s new forecasts did not have inflation falling back to target until late in 2025.
“We agree with this outlook and think that any talk of interest rate cuts in the first half of the year is premature,” he said.