The SOMP, delivered quarterly, details major economic forecasts and insights from the bank, and any changes are heavily scrutinised.
In his time as governor, Dr Philip Lowe reiterated the target of the "midpoint" of the underlying 2-3% inflation band was forecast to be delivered by the end of 2025 i.e. 2.5%.
Now that's changed slightly off the back of higher-than-anticipated inflation, and it might prove that the RBA resting on a 4.10% cash rate for four months was not enough.
"The outlook over the next year has been revised higher compared with three months ago, consistent with lingering demand pressures in the economy," the SOMP's overview read.
"Inflation is expected to decline more gradually than previously forecast. Inflation is forecast to decline to around 3.5% by the end of 2024 and to reach a little below 3% at the end of 2025."
"A little below" is the key phrase here - almost deliberately diffuse - implying the midpoint might not be reached until some time in 2026.
Tuesday's hike to a 4.35% cash rate, dubbed by many economists as an "insurance" hike, might also not be enough.
"The data received over recent months indicate that the domestic economy has been a bit stronger than previously thought," the SOMP read.
"Inflation expectations might drift higher, which could further delay the return of inflation to the target range."
In his appearance on the Savings Tip Jar podcast, Judo Bank economic adviser Warren Hogan criticised the RBA's four months of inaction.
"Their credibility is on the line ... with their 'softly'softly' approach of just little steps here and there," Mr Hogan said.
"They are constantly mugged by reality every time quarterly inflation number comes out."
However he also said the RBA won't want to risk higher-than-forecast inflation to bleed into 2026.
"[The risk is] having to raise rates four or five times, which would do a lot of damage," Mr Hogan said.
"It's less of a risk that they push the inflation target, than they just lose their patience and jack up rates a lot.
"5.5% to 6% next year will put us into recession. So it's good that they're responding, but I think they can still be a little bit more assertive."
In an update to the above comments, on Friday Mr Hogan told InfoChoice a lot hinges on stronger than expected economic growth, despite Australia being in a per-capita recession.
"It is not clear to me how they will deal with further upside inflation surprises. It is clear that they have not ruled out further rate hikes but they are in no rush and will remain patient," he said.
Many major bank economists are forecasting 4.35% is the peak, though NAB's are forecasting one more in February 2024, which would presumably bring the cash rate to 4.60%.
NAB's head of market economics Tapas Strickland also highlighted that "the RBA’s inflation forecasts are conditioned on one further partial rate hike" to 4.50%, implying a 15 basis point increase in the future.
AI image of Michele Bullock generated via MidJourney
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