Betashares chief economist David Bassanese has indicated that the Reserve Bank of Australia’s (RBA) recent statement was interpreted as less aggressive than anticipated, maintaining the possibility of interest rate reductions in the coming year. This outlook persists despite forecasts suggesting annual inflation will temporarily surpass 3 per cent. Betashares is an Australian investment management firm that specialises in exchange-traded funds (ETFs). The company provides investors with access to a range of investment strategies across various asset classes.
Bassanese emphasised that the critical indicators for monetary policy decisions are the quarterly and monthly annualised inflation figures. He projects these figures will decelerate to just under 3 per cent by March, potentially paving the way for a rate cut as early as May. This timeline suggests that the RBA may act sooner than some market predictions, contingent on inflation trends aligning with Bassanese’s expectations.
While acknowledging the possibility of delayed rate cuts, Bassanese clarified that such cuts are “not denied.” However, he cautioned that the risk remains of persistent inflationary pressures potentially forcing the RBA to maintain current rates or even implement further increases in 2026. This scenario underscores the uncertainty surrounding future monetary policy decisions, with the RBA navigating a complex economic landscape.
Bassanese noted emerging signals suggesting the Australian economy may be more susceptible to inflation than previously believed. This observation introduces the possibility that additional rate cuts may not be guaranteed, and there is an emerging risk that rates may need to increase next year to control inflation. The RBA’s decisions will be closely watched as the economic outlook evolves.
