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Is Australian monetary policy tight enough?
There is key evidence that monetary policy has not been sufficiently tight. Comparing the cash rate to the policy setting suggested by various ‘rules’ that summarise past central bank practices and the stance of policy in other countries suggests the RBA policy setting has been too easy. Maybe we are witnessing an immaculate disinflation but assessing the level of the cash rate suggests there are significant risks to the disinflation path and interest rate outlook. Inflation has slowed substantially from a peak of around 8% at the end of 2022 to around 4% at the end of 2023. But much of this decline came from an ... (full story)