Silent Reserve Bank of Australia, a Green Light for Interest Rate Cuts?

The Reserve Bank of Australia (RBA) has refrained from making public statements regarding its interest rate policy for two months, leading to analysis in the financial market that there is a high possibility of a rate cut on the 18th.

Reserve Bank of Australia (RBA) (Photo by Jeong Dong-cheol)

According to the Australian daily The Australian on the 14th, Australian financial experts expect the RBA to decide on an interest rate cut at this month's monetary policy meeting, as it has remained silent on inflation figures since holding the rate steady on December 9-10 last year.

In the December quarterly Consumer Price Index (CPI) statistics last year, core inflation slowed to 3.2%, prompting economic experts to begin analyzing that the fight against inflation has entered a new phase. With the annual inflation rate reaching the 2-3% target range, it was judged that it was time to shift direction toward lowering interest rates.

Accordingly, the Australian financial market forecasts that at the first monetary policy meeting of the new year on the 18th of this month, the RBA will cut the benchmark interest rate from the current 4.35% to 4.1%, a 0.25 percentage point reduction, with a probability exceeding 90%.

Shane Oliver, Chief Economist at comprehensive financial company AMP, said, "If the RBA wanted to control these market expectations, it would have given some signals through an official speech in early February. However, the fact that it has not done so can be seen as positive evidence of a high possibility of a rate cut."

The RBA has not made any official comments on interest rates since releasing Deputy Governor Andrew Hauser’s speech on December 11 last year and the minutes of the meeting just before Christmas.

Jonathan Cohns, Chief Economist at financial services company Challenger and former head of the RBA’s Financial Stability Department, pointed out, "With expectations for a rate cut already so firmly established, if the RBA does not cut rates this time, the market will be shocked. The RBA missed the opportunity to adjust market expectations through its silence."

Following comprehensive reforms led by Federal Treasurer Jim Chalmers, the RBA has significantly changed its communication methods. Now, the RBA holds a press conference after every interest rate decision, issues press releases in a format different from the past, has expanded its public relations staff, and appointed Sally Cray, former Chief of Staff to ex-Prime Minister Malcolm Turnbull, as head of the PR team.

The Australian Labor Party government, facing a general election in April-May this year, is waiting for a rate cut to ease the burden of mortgage interest payments, which have increased due to 13 rate hikes since May 2022.

Lucy Ellis, Chief Economist at Westpac Bank and former RBA Deputy Governor, emphasized, "The RBA always faces considerable external pressure regarding monetary policy decisions but has always maintained its independence."

Jung Dong-chul, Hanho Times Reporter

※This article was written based on content provided by Hanho Times (www.hanhotimes.com).