The Reserve Bank of Australia sends a signal of “patience”: downplaying short-term data fluctuations and taking a cautious stance on interest rates under high inflation

The Zhitong Finance App learned that Australian Federal Reserve Vice Chairman Andrew Hauser said a few days ago that when evaluating inflation, the bank will focus on trends over the next one to two years rather than reacting to individual data, which sends a signal that policymakers will be patient and cautious about future interest rate adjustments.

In an interview on Thursday, Hauser pointed out that the inflation rate above 3% is “still too high” and that policymakers will wait for the full quarterly inflation report to be released on January 28 to form a complete judgment on consumer prices. At the same time, he hinted that Australians have probably already witnessed the last rate cut in the current interest rate cut cycle.

“I know this isn't the news that all viewers want to hear,” Hauser admits.

The day before this statement was released, official data showed that Australia's inflation slowed in November, but the overall and core inflation indicators were still higher than the central bank's target range of 2%-3%. Hauser said a series of monthly inflation figures helped, but the results were “largely in line with expectations.”

Following his speech, the probability that traders expected the central bank to raise interest rates in May fell back to 80% from full pricing in early market trading. The price of policy-sensitive three-year treasury bonds rose in response, and yields declined.

Prashant Nunaha, a Singapore-based strategist at TD Securities, explained: “The market believes that the Deputy Governor's remarks suggest that the Reserve Bank of Australia's position has not changed significantly, so the central bank may keep interest rates unchanged for a long time rather than requiring an early rate hike.”

Since the last rate cut in August last year, the Reserve Bank of Australia has maintained the benchmark interest rate at 3.60%, and its policy focus has turned to dealing with a new round of inflationary pressure in the context of continued labor market tension and weak productivity growth.

Minutes from a recent monetary policy meeting show that policymakers have discussed the conditions that may require interest rate hikes, but any action will depend on subsequent data. Officials acknowledged that the full effects of the 75 basis point easing policy implemented between February and August “have yet to be fully demonstrated.”

When asked what circumstances might prompt interest rate hikes, Hauser's answer was slightly humorous: “How direct can I be on TV?” He later explained, “We don't have a hard rule similar to “hold on until inflation reaches 0.9%, raise interest rates at 1%, and cut interest rates at 0.7%.” We consider the overall state of the economy.”

In an environment of high inflation, consumers remain cautious: actual per capita spending has remained flat, savings rates have risen slightly, and households are still rebuilding their financial buffers. At the same time, the Reserve Bank of Australia still believes that the labor market is tight and the output gap is positive, which forms a challenging macro background for monetary policy formulation in 2026.