...while the RBA is unlikely to raise rates, it is unlikely to lower them soon either, hoping that the present rate for longer would be enough to drive inflation lower. The banks however are acting as if rates ought to be cut, and have pre-emptively moved, probably to cajole the RBA into action. RBA decision is due Sept 24, about a week after the Fed's FOMC.
...RBA has already sounded that it won't follow the well publicised Fed move in Sept.
Huge story in AFR today with RBA's recently departed head of economics research smashing the central bank: "The Reserve Bank’s recently departed research chief says a decision not to raise interest rates further risks entrenching high inflation and hasn’t been adequately scrutinised by the central bank’s board.
John Simon has also urged Treasurer Jim Chalmers not to automatically shift all existing RBA board members to a new interest-rate setting board, given an independent review last year found the group’s lack of economic expertise meant it was unable to challenge the governor on interest rate decisions. “There was always concern about putting economic research in front of the board if they weren’t actually trained to understand it,” Dr Simon said in his first interview after his three-decade career at the RBA ended last month... Dr Simon warned the risks around the RBA’s current monetary policy strategy were “asymmetric”, meaning they skewed more toward inflation remaining unacceptably high. He said it was possible that inflation expectations could get entrenched at high levels if the central bank failed to tame price pressures in a timely manner. “I think whenever you’re on one side of the inflation target – and at the moment the forecasts are for us not to get back to the midpoint [of the target band] over the [two-year] forecast horizon – I think that is an underappreciated risk,” Dr Simon said... “To the extent that [the reviewers] found that the bank did not value research as much as it could and that it lacked a culture of challenge – that very much aligned with my experience,” he said. Dr Simon said the RBA board’s lack of monetary policy expertise was one of the reasons why the central bank had failed to put more value on research."
RBA won’t copy the Fed on 2024 rate cuts: Hauser Michael ReadEconomics correspondent
Aug 30, 2024 – 6.03pm
The Reserve Bank of Australia will not follow the US Federal Reserve and cut interest rates this year because inflation is still too high and the 4.35 per cent cash rate is not very high by global standards, deputy governor Andrew Hauser says.
“Sadly, at the moment, Australian inflation is a bit stickier than it has been in the US,” Mr Hauser said on Friday.
