The Reserve Bank boss and her board have had their notes or minutes from their August meeting released and they’re telling us that Michele Bullock is trying to spook us with tough talk and could be bluffing that rate cuts aren’t happening this year, or she is bloody minded and deadly serious!
My take is that she isn’t ruling out a cut if the economic data proves to be slower and weaker than expected over the next three months, making a December cut a possibility. But the Governor of the RBA and her board aren’t expecting a surprise slowdown.

I want it for the poor third of Aussies with mortgages, but I suspect a big chunk of the other two-thirds are living the life of Riley! This was rammed home when I flew to Tassie last Friday, when I saw the Hobart airport packed, with queues akin to the ones that made the early months after the Covid lockdown long and painful.
I explained this crowd as people flying to footie games and those trying to escape to the warmth of Queensland after some frosty weeks down south. But then on Monday afternoon at Launceston, the airport was packed again!

The main points of the minutes were:
1. The Bank’s board seriously discussed a rate rise.
2. If the cash rate that’s now at 4.6% was cut to 4.1% by the end of this year, then inflation wouldn’t reach around 2.5% until 2027.
3. Economic data was warning the Bank that getting to around 2.5% by late 2025, which the RBA thinks is achievable, was worrying the board that inflation might be persistently sticky.
4. The outlook for household consumption and government demand was getting stronger not weaker.
5. Total demand for goods and services was looking like it could outstrip supply, which isn’t good for inflation.
6. House prices rising and loan borrowing wasn’t consistent with a slowing economy that would lower inflation.
The Australian’s Joe Kelly talked with Abhijit Surya from Capital Economics, who said a “key reason behind the bank’s hawkish messaging is that markets have recently been running away with the narrative that rate cuts will be on the table before year-end, leading to a loosening of financial conditions.”
Right now, the financial markets think an end-of-year rate cut is likely. So do the economics teams at Westpac and the CBA. This is what the latter’s economist Gareth Aird said as a reaction to the minutes: “On economic data, the board intends to place a “somewhat greater-than-usual weight” on the flow of data, in a sign of heightened uncertainty around the economic and policy outlook. Financial market pricing implies the RBA’s next move is down, with a rate cut seen as soon as December. Markets are wagering there is an 84% probability that the RBA could cut by the year-end, and a cut in February 2025 is more than fully priced in.
“But Commonwealth Bank (CBA) Group economists see both inflation moderating more quickly than the RBA’s forecasts and unemployment stepping up a little faster, which is why they have retained their call for the RBA to commence an easing cycle in the final quarter of 2024.”
So, this is a ‘high noon shootout’ between the hotshots at the CBA and the RBA boffins. Only economic data over the next three months should determine who ends up on the economists’ Boot Hill!
I don’t think Ms Bullock will be bloody-minded and keep rates higher for longer, if the data says the economy is slowing faster than the RBA thinks. But if she does, there’ll be plenty of economists giving her a reminder of the interest rates mistakes of previous Governors, and there have been a few of them.