Michael Janda

It's incredibly narrow.

It's a proper high wire act at this point.

What the Reserve Bank has clearly done today, in my opinion at least, is to lean very much on the side of that path that is leaning over the precipice of recession to stay away from the fire of inflation.

So they have taken another step today that brings Australia indisputably closer to the risk of a recession with three rate hikes in a row.

but their hope is that it stamps out any threat of ongoing inflation and price pressures staying out of control and maybe a more damaging recession later on if we allowed inflation to remain out of control.

So interestingly, the forecast for inflation, not in the short term, but over the longer term, have actually come down from the pre-war previous statement on monetary policy.

But the market pricing for interest rates is up by about half a percentage point since that previous statement.

So basically because they're using the market pricing and now we've seen another one of these interest rate hikes,

what you've seen is that will pull demand down in the economy and it will get inflation under control faster.

Interestingly, and we might talk about this a bit more later, but in its adverse scenario, so not these baseline forecasts, but the Reserve Bank doing some

what they call scenario modelling, like if the straight stays closed for months more instead of weeks more, what could happen?

Inflation actually comes down even quicker in the longer term, even though it's a bit higher in the shorter term, but that's because of the increased economic damage along the way.

So 1.3% annual growth to the year to December and staying at that very low level right through to the middle of next year.

Yeah, very modest.

So under the baseline forecast, they have unemployment peaking around 4.7% in a couple of years' time.

We're currently around 4.3%.

So that's not a massive jump.

Yeah.

So they've clearly taken the view that the economy was very tight coming into this.

They already hiked interest rates once before the Middle East conflict even kicked off.