Reserve Bank’s path to a soft landing is very narrow indeed
Further rate rises would make it harder for the RBA to achieve the trifecta of a small rise in spare labour, with employment still increasing and inflation back at target.
Financial market pricing suggests it’s a coin toss whether the Reserve Bank of Australia will lift rates in the next few months.
This is a sharp turnaround from earlier expectations of rate cuts; homeowners’ hopes were cruelled by higher-than-expected inflation. With inflation persistent, and the prospect of further rate rises, is the central bank stumbling off its narrow path into the inflationary or recessionary abyss below?
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Jonathan Kearns is chief economist at Challenger and Adjunct Fellow at Macquarie University. He previously held a range of senior roles at the Reserve Bank of Australia.
