Speaking in Sydney today, assistant governor Sarah Hunter said the first rate cut from the board last month in more than four years had prompted “a lot of interest” in its operations.

While the 0.25% cut was widely anticipated, mortgage holders had been left hanging in the months leading up to the historic decision thanks to suboptimal inflation variance.

In less-than-ideal news for borrowers, Ms Hunter today acknowledged the bank is rarely able to respond to immediate market shifts.

This is thanks to the lengthy period of time between setting policy and seeing its impact.

“While it takes about nine months for the cash rate to have its biggest impact on GDP, the peak effect on inflation is estimated to take nearly twice as long,” she said. “This necessitates a forward-looking approach to meeting our mandate.

“Policy decisions require both a view of the outlook for the economy and an understanding of how policy is likely to affect that outlook. That helps the board set the cash rate to give the best chance of achieving the RBA’s objectives over time.”

Having to constantly updates it views and therefore its policy advice also comes with implications, she added.

“The future pathway for the cash rate is not predefined,” Ms Hunter said. “Policy decisions today shape inflation and employment outcomes in the future.”

Natural domestic pressures in a federal election year underpinned by a volatile geopolitical outlook means the board is also shaping its decisions in it terms “policy under uncertainty”.

“In practice we are uncertain about both the outlook for the economy, and the effect of monetary policy,” Ms Hunter warned. “This complicates policy decisions.

“Under uncertainty, policy depends on more than just the central forecast – judgements about the risks and uncertainties matter too. That’s why it’s important to consider alternative possible pathways for the economy and how policy would have to respond.”

Sourced from realestate.com