Will the RBA field an inflation curve ball?

Recent bank funding developments will make the Reserve Bank's rates decision more complex than usual if inflation falls in the top half of its target band.

On the one hand, the RBA may throw caution to the wind and cut rates further and faster in order to have its desired effect. Alternatively, Australia’s central bank could conclude that its two cuts in November and December, which have been passed on by the banks, have supplied sufficient relief for the time being, and it can wait to gather better information. There is, after all, something to be said for stability. And there is little doubt that a rate cut that was not passed on by the banks could prove damaging and destabilising to community confidence.

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