The Reserve Bank of Australia (RBA) has once again chosen to keep interest rates on hold, citing concerns about the reliability of the monthly inflation data produced by the Australian Bureau of Statistics (ABS).
That frustrates me.
If the RBA doesn't trust the monthly CPI figures, then why does the ABS produce them? Why invest public resources into creating a national economic indicator that the central bank disregards when making key decisions?
What’s the Point of Monthly Data?
The ABS introduced the monthly CPI indicator to provide timelier insights into inflation trends between quarterly releases. In theory, it should help policymakers respond more quickly to economic shifts.
But the RBA’s stance sends a contradictory message:
“It’s too volatile.”
“It’s not reliable.”
“We’ll wait for the quarterly numbers.”
If that’s the case, then let’s ask the obvious:
Why hold 11 meetings a year when only 4 of them are informed by quarterly inflation data?
If the RBA is only acting on full quarterly data, then its meeting schedule should reflect that. A monthly meeting calendar only makes sense if you’re going to treat monthly data as meaningful.
When the RBA Did Respond to Monthly Inflation Data
The inconsistency is even more frustrating when we look back at recent decisions. The RBA has referenced or aligned decisions with monthly CPI figures when it suited the narrative:
RBA Decisions Influenced by Monthly Inflation
February 2025
➤ Cut rates by 25bps.
➤ Cited "moderating inflation" and signs of easing in monthly CPI.May 2025
➤ Another 25bps cut.
➤ Monthly CPI showed continued disinflation, supporting the move.July 2025
➤ Held rates.
➤ Monthly CPI (trimmed mean) came in at 2.4%, within the RBA's target band.
➤ RBA dismissed the result, with Governor Michele Bullock stating:"The monthly CPI is not a full CPI... The components vary, and we’re waiting for quarterly data before making a call."
So: the data is "good enough" to back a rate cut, but not good enough to justify holding or raising?
A Call for Consistency
The RBA’s communication and timing are out of sync. If monthly CPI isn't robust enough for real decisions:
- Don’t meet monthly.
- Or better: upgrade the monthly CPI so it can be trusted.
Because right now, it's hard to tell whether the data is the problem — or whether it's just a convenient excuse.