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RBA governor Michele Bullock's mistake before interest rate decision: 'Needs to fix this'

The RBA to get to grips with the narrative surrounding interest rates as millions of struggling Aussies feel clueless about what 2024 will look like.

The Reserve Bank of Australia's (RBA) leader needs to address the "silence between meetings" as millions of borrowers come to grips with the reality that an interest rate cut is not likely to come any time soon. Changes came in February that reduced the number of times the central bank met and could make changes to the cash rate after a blitz of back-to-back hikes from a record-low of 0 per cent in 2022.

Governor Michele Bullock also now addresses the media directly after to explain the board's decision, as she did after announcing the cash rate would be held at 4.35 per cent on Tuesday. However, economist and Yahoo Finance contributor Stephen Koukoulas said there's a big mistake that's putting undue stress on struggling Australians.

"The silence between her meetings. An occasional speech is important," Koukoulas said.

"The void has been filled by headline grabbers covering all sorts of tosh which is dutifully reported.

RBA governor Michele Bullock
RBA governor Michele Bullock needs to help the Australian public understand what's in store for 2024. (Getty)

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"Bullock needs to fix this."

There's important context to the changes the Reserve Bank made to how it made and communicated its decisions on monetary policy.

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A decision was made to reduce the number of meetings from 11 to eight after 51 recommendations were made in a review of the RBA last year. These were largely to do with improving transparency and communication.

By having less frequent and longer meetings, the RBA has said it will have more time for deliberation and to discuss strategy, alternative options and risks, as well as how movements are communicated to the public.

“In building out these changes, we have been mindful of two key aims highlighted in the review – providing more opportunity for deep and informed deliberation, and providing a clearer explanation of monetary policy decisions to our various audiences,” Bullock said last year.

But on the flip side, experts did note this could mean bigger, more drastic rate changes when the board did meet.

Bullock may be holding her tongue after her predecessor Philip Lowe faced heavy criticism when would-be borrowers jumped at the opportunity to buy a home, some overextending themselves, based on the bank's projection that the cash rate would remain at historic lows until "at least 2024".

As we all know, that was not the case and how effectively Lowe communicated that message was at the heart of the independent review into the RBA.

Australians were surprised at the rapid rate of interest rate hikes, pushing some households into serious mortgage stress.

Bullock fronted the media twice before. Once after the February decision and again after another hold in March.

But it had been 49 days since then and Australians have seen an influx of data from the Australian Bureau of Statistics about inflation, the unemployment rate, consumer confidence and the cost of living index.

So, should the person tasked with communicating with the Australian public about the outlook of inflation, and the central bank's plan to tackle it, speak up more often?

Particularly with so many other voices steering the narrative? Koukoulas isn't the only one who thinks so.

Households were widely expected to be spared from another rate rise following the central bank's May meeting on Tuesday.

The RBA did keep the cash rate on hold at a 12-year high of 4.35 per cent.

Inflation currently sits at 3.6 per cent, but quarterly data showed an unexpected increase. This prompted calls for more interest rate rises this year.

Koukoulas told Yahoo Finance he was confident the cash rate will remain on hold, but noted Bullock's language would be a big indicator for the future.

"The RBA is set to hold interest rates steady, remaining calm about the inflation outlook and with an eye to the economic slowdown that is unfolding," he said.

"Bullock is likely to express some frustration at the speed at which inflation is falling and returning to the 2 to 3-per cent target band.

"But will also provide updated forecasts that confirm the weak economy and softening labour market will take pressure off inflation over the slightly longer run."

He said she was likely to retain her 'not ruling anything in or out mantra', and was right.

"No surprises to most sober people. It sort of puts the kibosh on the rate hike crazy cats out there recently," he said.

But it wasn't just our resident economist making this claim. Market analyst Josh Gilbert at eToro was taken aback by the language in the monetary policy decision statement

"The surprise was that we didn’t get the stern hawkish tone that was expected by many. Yes, the RBA’s language is more hawkish than its previous statement, but in no way does it point towards a tightening bias; instead, it is firmly neutral," he said.

“It might not sound like it if you read the statement the Board put out to accompany their latest rate decision, but what you are actually seeing is the RBA being patient," Scott Kuru, CEO of Freedom Property Investors and Freedom Investment, added.

"They know that they have already whacked Australians hard with 13 interest rate rises and that it will take some time for the full impact of that to flow through the economy.”

Koukoulas said upcoming data on local wages, unemployment and inflation, along with the international economy, would all play into further decisions.

Economists are divided on an interest rate cut, some forecasting one in November and others claiming there's another three in our future.

  • Commonwealth Bank (CBA): Cash rate peak: 4.35 per cent. First cut: Likely November 2024. Rates to drop to 3.10 per cent in late 2025.

  • ANZ: Cash rate peak: 4.35 per cent. First cut: Around November 2024. Rates to drop to 3.60 per cent by this time next year.

  • NAB: Cash rate peak: 4.35 per cent. First cut: November 2024. Rates to drop to 3.10 per cent by the end of 2025.

  • Westpac: Cash rate peak: 4.35 per cent. First cut: November 2024. Rates to settle at 3.10 per cent in September quarter of 2025.

Former governor Lowe has even warned this week the fight against inflation is not over, and rate hikes could be used to fight against it.

There are banks making out-of-cycle interest rate cuts to remain competitive, with mortgage holders urged to shop around.

Even if the RBA does cut interest rates, experts have warned the major banks may not pass on any cash rate cuts in full to mortgage holders.