Three down, three more to go.
For mortgage holders, that was the most optimistic takeaway from Michele Bullock’s press conference after the Reserve Bank of Australia’s decision to cut its cash rate for the third time this year.
The RBA’s cash rate target started the year at 4.35% and – after moves in February, May and now August – it has reached 3.6%.
“We’ve become increasingly confident that inflation is on track to be in our 2% to 3% target range on a sustainable basis,” the RBA governor said, before adding that the central bank and its board were “determined to keep inflation down”.
Those rosy inflation forecasts depend on a key assumption, or what Bullock called the bank’s “best guess” about where rates would go from here.
That assumed path is a further rate cut by the end of this year, another by the following June, and then potentially one more by the end of 2026.
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“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 said.
And while the direction of travel for rates looks clear, there was plenty of evidence from Bullock’s press conference that the RBA is not particularly convinced when those moves need to happen.
In July the board surprised us by not cutting its cash rate. But Bullock made it clear that the RBA just needed to tick a couple of boxes before taking the plunge.
Now, the vision is much blurrier. The board is taking things “meeting by meeting”, the governor said a number of times.
What would potentially determine when we might get another cut?
She responded with a laundry list of data that the central bank’s policy board considers when they make their decisions.
Another question: Is the cash rate at 3.6% a handbrake on the economy?
Maybe, maybe not, Bullock replied.
All of which is to say: again, two or three more rate cuts is the bank’s “best guess”.
Sure, it would be nice to think the bank can do more than just guess, but monetary policy this deep into a cutting cycle looks a lot more like art than science.
For now, we will have to console ourselves with the prospect that interest rates, at some stage, “might need to be a bit lower”.
• Patrick Commins is Guardian Australia’s economics editor
