Australia’s central bank, the Reserve Bank of Australia (RBA), highlighted significant economic uncertainty on Monday, explaining its cautious stance on interest rates as it waits for more data. RBA Deputy Governor Andrew Hauser, speaking in Brisbane, noted that inflation remains high due to less spare capacity in the economy than previously estimated, but acknowledged that forecasts are prone to error.
Core inflation, currently at 3.9%, is only expected to return to the target range of 2-3% by the end of 2025. Hauser emphasized the need for humility in economic forecasting, stating, “In many cases, the answer we ought to give is that we simply do not know.”
The RBA has maintained a steady policy since November, keeping the cash rate at 4.35%, despite some calls for higher rates. Markets now expect a rate cut by year-end, reflecting the bank’s cautious approach to economic risks.