Reserve Bank of Australia Statement on Monetary Policy for August 2022.

Headlines via Reuters. Bolding Italics is mine.:


Those bullet points seem incongruous. I say incongruous because to say insane would perhaps be rude.

Those forecasts for inflation are very high indeed:

  • headline to 7.75%
  • core to 3.75% at the end of next year. That's just about 18 months away. That would be above the top of the band until then?

And yet the forecasts are based on a cash rate of 3%.

  • its currently just over 1.8%, why the delay in getting there? And why is 3% assumed when headline inflation will be nearly 8%, and core nearly 4%?

And as to that first bullet point: Ready to do what is necessary to bring inflation back to 2-3% band. No. You are not. The RBA is in a tough place. The risk is slowing the economy dramatically with rate rises. But if getting inflation under 3% is a Bank mandate, and it is, then why the delay in rate rises. Why is the Bank accepting above target CPI right through for the next 18 or so months (at least).

And as for the market, you can wipe that smirk off your face. On Tuesday the market perceived the RBA would be dialling back the pace of rate hikes. On the basis of this Statement why on earth would they do this?


Full text is here:


more to come