The Reserve Bank of Australia published research finding that professional forecasters sharply increased their estimates of monetary policy’s responsiveness to inflation after sustained tightening began in 2022. Using Australian survey data from 2015 to 2025, the study finds that, amid elevated uncertainty following COVID, beliefs about inflation’s importance adjusted only after forecasters observed actual policy actions, highlighting the limits of communication alone. Before the pandemic, perceived responsiveness to inflation was modest, reflecting expectations that rates would not be cut to address low inflation. Central bank communication about labour market conditions and financial stability also shaped perceptions of how policy would respond to economic conditions. Differences in longer-term beliefs, including expectations for long-run inflation, played an important role in shaping interest rate forecasts.
Reserve Bank of Australia research finds forecasters revised perceived inflation responsiveness after observing policy tightening
Reserve Bank of Australia research using professional forecaster surveys from 2015 to 2025 finds that perceived policy responsiveness to inflation rose sharply after sustained tightening began in 2022. During elevated uncertainty following COVID, forecasters revised their beliefs about inflation’s importance only after observing policy actions, while differences in longer-term beliefs also shaped interest rate expectations.