RBA Assistant Governor Christopher Kent, in a speech today, emphasized that recent economic data have been “mixed,” reinforcing the need for RBA to “remain vigilant to upside risks to inflation.” Kent reiterated that, regarding the path of interest rates, RBA is “not ruling anything in or out.”
Kent noted that the recent median estimate among market economists suggested that the cash rate was around 1 percentage point above the nominal neutral rate. This indicates that current monetary policy is restrictive.
However, he acknowledged the significant uncertainty surrounding estimates of the neutral rate, making it unclear how restrictive monetary policy truly is.
Additionally, Kent mentioned that RBA’s own models suggest that the neutral rate has increased since the pandemic, aligning with trends observed in other economies.
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