The RBA stuck to the script and kept rates on hold while taking a hawkish tone. Personally, I think they should have hiked. It's becoming increasingly difficult to reconcile the RBA's statements that bringing inflation back to target is their main goal while they take no actions to do so.
Of more interest were the rather grim updated forecasts the RBA made in its statement of monetary policy:
😬 Inflation won’t be back to 2.5% until early 2028.
😬 Growth is going to remain below 2% through December 2028.
😬 Labour productivity is forecast to be negative for the remainder of this year and remain below 1% through the end of 2028.
😬 Real wage growth is also going to be negative through the end of 2027 and below 1% through 2028.
🫠 The only (sort of) bright spot was the RBA are predicting only a small increase in unemployment (to 4.8%) by the end of 2028.
These aren’t signs of a particularly healthy economy and no doubt weighed into the RBA’s decision to keep rates on hold. The RBA has consistently made the choice to tolerate some excess inflation in the attempt to walk a narrow path back to target without tipping the economy into recession. Unfortunately, that plan hasn’t really worked and the timing for a return to target inflation has now been consistently ‘two years away’ for about five years. In order for a target to mean anything you have to meet it, and the longer the RBA go without doing that the less credibility they have.