Comprehensive RBA Board rate probability analysis and Australian economic insights
The Reserve Bank of Australia's Board meets regularly to assess monetary policy stance and economic conditions. Rate change probabilities are calculated based on Australian short term interest rate curve data, as far as available. Missing data points are estimated using the Nelson-Siegel-Svensson yield curve model.
| Meeting Date | Cut | No Change | Hike |
|---|---|---|---|
| March 17, 2026 | 0.0% | 100.0% | 0.0% |
| May 5, 2026 | 0.0% | 9.1% | 90.9% |
| June 16, 2026 | 1.6% | 23.7% | 74.7% |
| July 21, 2026 | 0.7% | 10.7% | 88.7% |
| September 1, 2026 | 0.0% | 0.0% | 100.0% |
| October 6, 2026 | 3.7% | 18.9% | 77.4% |
| November 3, 2026 | 0.5% | 5.1% | 94.4% |
| December 1, 2026 | 0.5% | 5.1% | 94.4% |
While the empirical probabilities above show what financial markets expect (based on yield curve pricing), the theoretical rate below shows what economic models suggest the RBA should do based on current economic conditions like inflation and growth.
Comparing these helps us understand whether the market expects the RBA to follow economic theory, or if they expect the RBA to take a different path for practical reasons.
The following analysis compares market-implied rate expectations with model-based theoretical rates calculated using a policy-rule framework adapted for Australia. This comparison provides insight into the market's assessment of the RBA's reaction function relative to economic fundamentals.
| Indicator | Current | Target/Neutral | Gap |
|---|---|---|---|
| Inflation | 3.80% | 2.00% | +1.80 pp |
| Output Gap | 0.40% | 0.00% | +0.40 pp |
| Unemployment | 4.30% | N/A | N/A |
We use a Taylor-rule style benchmark for Australia. The model starts with a neutral rate, adds current inflation, and then adjusts for inflation being above or below the target band and for whether the economy is running hot or soft.
Inflation and the output gap are the direct inputs in the simplified rule. Unemployment is shown as an additional labour-market cross-check that helps interpret economic slack.
See the full Taylor Rule methodologyPolicy-rule mapping: the theoretical RBA rate is calculated using a Taylor-rule style specification in which observed inflation enters both in levels and relative to target, while economic slack enters via the output-gap term.
Here, $r^*$ is the neutral real rate, $\pi_t$ current inflation, $\pi^*$ the inflation objective, and $y_t$ the output gap. Unemployment is included as a supplementary slack indicator. Full derivation and assumptions are documented on the Taylor Rule methodology page.
The theoretical rate is calculated using a Taylor Rule style framework adapted for Australia. It considers:
When actual rates are below the theoretical rate, policy is considered accommodative. When above, policy is restrictive.
Model: RBA Policy Rule Framework
Specification:
Where: $i_t^*$ = theoretical policy rate, $r^*$ = neutral real rate, $\pi_t$ = current inflation, $\pi^*$ = inflation target, $\text{Gap}_t$ = output gap, $\alpha$ and $\beta$ are policy response coefficients.
For broader model documentation and framework context, see the Reserve Bank of Australia Economic Models page.
Empirical Probabilities:
Economic Indicators:
Explore detailed discussion of RBA modeling frameworks and assumptions
View Reserve Bank of Australia Economic ModelsValidation: Model outputs are continuously compared against RBA communications and consensus expectations.
Speech by Ms Michele Bullock, Governor of the Reserve Bank of Australia, at the Australian Financial Review Business Summit, Sydney, 3 March 2026.
Opening statement by Ms Michele Bullock, Governor of the Reserve Bank of Australia, to the House of Representatives Standing Committee on Economics, Canberra, 6 February 2026.
Remarks by Ms Sarah Hunter, Assistant Governor (Economic) of the Reserve Bank of Australia, at Committee for Economic Development of Australia "CEDA: in conversation series", Perth, 12 February 2026.
Panel participation by Mr Andrew Hauser, Deputy Governor of the Reserve Bank of Australia, at the 2026 US Monetary Policy Forum, New York City, 7 March 2026.
Remarks by Ms Sarah Hunter, Assistant Governor (Economic) of the Reserve Bank of Australia, at the Norges Bank (Central Bank of Norway) Monetary Policy Mandate Conference, Oslo, 2 March 2026.
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