in June, once the funds rate was above the core inflation rate.
We are still a long way from a positive real cash rate in Australia, with core inflation of 5.9 per cent, a full 180 basis points above the 4.1 per cent cash rate. But the RBA is expecting the core inflation rate to fall to 4 per cent by the end of this year, which should then yield a positive real interest rate. That might be good enough for the RBA board.
Even with a weaker-than-expected Q2 outcome, the core inflation number came in at 5.9 per cent, just 0.1 percentage points below the RBA’s forecast for June of 6 per cent.The forecasters at the RBA still need two more 0.9 per cent increases over the next six months to get core inflation down to 4 per cent by December.
A strong third-quarter core inflation outcome could result in an upward revision to the 2023 forecast.
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