Determining rate decisions based on past data was akin to “driving by looking out of the rear-view mirror” and raised the risk of policy error.
“But equally, we are not sure there is a better approach,” Ticehurst and Seif said.
“And with the economy now growing at a near-trend pace, the policy rate now likely close to the nebulous neutral rate and policy shifts likely only occurring in small increments, the cost of any consequent error should hopefully not be large.”
The consensus is for the Reserve Bank to keep rates on hold on Tuesday.
Expectations for future moves will be influenced by the tone of the board’s statement, governor Michele Bullock’s post-meeting conference and updated economic forecasts which are released concurrently.
NAB senior economist Taylor Nugent expects the board to emphasise the need to remain on hold for a while longer to gain greater confidence about the path forward for inflation.
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“We expect caution to leave the RBA on an extended pause and little guidance about the path ahead as they gather more information about labour market and inflation dynamics,” he said.
While Commonwealth Bank now thinks the central bank has ended its easing cycle, Westpac still expects two more reductions next year, although later than previously predicted.
“Monetary policy is still somewhat restrictive,” said Westpac chief economist Luci Ellis, a former chief economist at the RBA.
“Further cuts to the cash rate next year are therefore warranted given underlying inflation will remain within the band and be heading down in coming quarters.”
The Australian Bureau of Statistics will also this week release data on consumer spending, building approvals and trade.
After growth decelerated in the previous two months, ANZ economists expect household spending to have picked up in September, with Monday’s figures predicted to show 0.4 per cent growth.
The ABS is also expected on Monday to report building approvals rose four per cent over the month, says ANZ’s Madeline Dunk.
“Private dwellings ex houses (units/townhouses) has declined 32 per cent over the past two months, so we expect to see there was a rebound in September.”
Elsewhere, Cotality’s Monday home value index should show further growth in nationwide property values.
AAP
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