James Morley

The improvement in various economic conditions suggests that the RBA will be able to begin liftoff from the effective lower bound in early 2024. The exact timing and speed of liftoff will depend on whether they have achieved a sustainable return of inflation to their 2-3% target range and where inflation is in the target range. If the RBA has not achieved the return of inflation to the target range by early 2024, they should extend keeping the cash rate at the effective lower bound until inflation does return to the target range. If inflation exceeds the target range well before 2024, they should start liftoff earlier. My forecast is that inflation and measures of inflation expectations are most likely to be within the lower half of the target range by the beginning of 2024, which would call for a gradual liftoff back to neutral that allows inflation to run at the higher end of the target range. This gradual liftoff would let the price level return back up to a general path for it based on 2-3% inflation per year from when the cash rate hit the effective lower bound in response to the COVID-19 crisis.

Outcome date: 
Monday 05 April 2021
Current rate: 
12 months: 
6 months: 
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Updated:  17 April 2021/Responsible Officer:  Crawford Engagement/Page Contact:  CAMA admin