Highlights

  • Research Discussion Paper 2026-06, by Hambur and Haque, was released by the RBA on 22 October 2026.
  • Professional forecasters updated their inflation views only after observing actual RBA rate decisions, not from communication alone.
  • Before the pandemic, forecasters gave little weight to inflation and did not expect rate cuts in response to low inflation readings.
  • The paper presents the authors' research and does not necessarily represent the views of the Reserve Bank of Australia.

A Reserve Bank research paper released on 22 October 2026 adds evidence to a longstanding question in central banking: when does communication move expectations, and when must a central bank act to be believed? The answer for the post-COVID period in Australia, according to the paper, is that actions moved the dial more than words.

What the Paper Measured

The paper, "Perceived Monetary Policy Rules: Evidence From Professional Forecasters in Australia," by Jonathan Hambur and Qazi Haque, used survey data on professional forecasters in Australia from 2015 to 2025. Rather than scoring whether forecasters' rate predictions turned out to be right, the study estimated what rule these professionals thought the RBA was following, and how that perception shifted over time.

The concept at the centre of the study is the perceived reaction function, the implicit rule linking economic conditions to the RBA's interest rate decisions that forecasters carry in their mental models. No central bank publishes a formula, so forecasters must infer one from observation.

The Post-COVID Finding on Communication

During the uncertain post-COVID period, forecasters did not revise their view of how responsive the RBA was to inflation simply because the Bank communicated about inflation. They updated their views after seeing actual policy decisions. Once sustained tightening began after 2022, perceived responsiveness to inflation rose sharply.

This finding has implications for how central bank credibility is built and maintained. If communication alone is insufficient to shift professional expectations during uncertain periods, the informational content of actual decisions carries greater weight than the words surrounding them.

The Pre-Pandemic Finding

In the years before the pandemic, forecasters placed little weight on inflation in their rate expectations. They did not expect the RBA to cut in response to low inflation, even though an inflation-targeting framework would suggest symmetric responses to inflation above and below target.

The paper also found that RBA communication about labour market conditions and financial stability shaped forecasters' views of the reaction function, suggesting some kinds of guidance were informative even where inflation guidance was not. The paper's overall results span three distinct episodes: pre-pandemic, post-COVID uncertainty, and the tightening cycle after 2022.