Recent interest rate rises have fuelled already fast-growing concerns over the rising cost of living facing Australians.
Since May the Reserve Bank has lifted interest rates to 1.85 per cent from historic lows of 0.1 per cent due to recent surging inflation, caused mostly by the COVID-19 supply chain disruptions and the war in Ukraine.
The central bank has been in hot water for sticking by guidance that interest rates would not rise until at least 2024.
That timeline has since been thrown out the window, but it is worth looking back at how the bank and Governor Philip Lowe were thinking during the course of the last two years.
On March 3, the RBA made its first rate cut in response to the emergence of the coronavirus pandemic.
The cut was by 25 basis points and brought the cash rate down to 0.5 per cent.
"The coronavirus has clouded the near-term outlook for the global economy and means that global growth in the first half of 2020 will be lower than earlier expected," Dr Lowe said in March 2020.
Two weeks later, the bank invoked a second emergency cut in response to the pandemic, flagging it was having a "very major impact on the economy and the financial system".
"Financial market volatility has been very high," Dr Lowe said in his March 19 statement.
"This is likely to remain the case for some time yet as efforts continue to contain the virus."
Further measures were also introduced including the establishment of a term funding facility which provided additional funding to banks and credit unions for up to three years.
A 0.25 per cent yield target was also established on three year government bonds.
Following the first wave lockdowns and Melbourne's extended lockdown, the RBA slashed the cash rate by another 15 basis points to 0.1 per cent.
This is the lowest the cash rate had ever been and the bank also took steps to implement a bond buying quantitative easing program to better assist liquidity levels in the economy.
It set out to purchase $100 billion in government bonds with maturities between five and 10 years over the next six months.
At this point in time the recovery from the pandemic was still being dubbed "bumpy and drawn out" and was hinged on being able to contain the virus.
Unemployment in the bank's eyes was still relatively high in 2020.
"The unemployment rate is expected to remain high, but to peak at a little below 8 per cent, rather than the 10 per cent expected previously," Dr Lowe said.
"At the end of 2022, the unemployment rate is forecast to be around 6 per cent."
Australia's two most populous states had reentered lockdown as a result of the Delta variant.
Interest rates were kept at 0.1 per cent and the bank had extended its bond buying regime until at least November.
"The recent outbreaks of the virus are, however, interrupting the recovery and GDP is expected to decline in the September quarter," Dr Lowe said in his August statement.
"The economic outlook for the coming months is uncertain and depends upon the evolution of the health situation and the containment measures."
During this period, the bank had indicated interest rates would stay at low levels until 2024 due to low inflation and wage growth.
Markets during this period had already started forecasting rate hikes were on the cards for 2022.
"The central scenario for the economy is that this condition will not be met before 2024,' Dr Lowe said.
"Meeting this condition will require the labour market to be tight enough to generate wages growth that is materially higher than it is currently."
In December the bank flagged it had started to notice higher dwelling prices and supply disruptions were fuelling a rise in inflation.
Central banks overseas had started lifting interest rates as a result of surging inflation.
However the RBA mostly remained tight lipped and retain its central guidance, with the governor claiming further wage growth needed to occur before a hike was enacted.
In his February statement, Dr Lowe noted inflation had picked up faster than first expected.
"The headline CPI inflation rate is 3.5 per cent and is being affected by higher petrol prices, higher prices for newly constructed homes and the disruptions to global supply chains," he said.
The bank had also ceased its bond purchasing over the period between December and the start of 2022.
It also pivots to acknowledging the war in Ukraine had grown as a major uncertainty to the global economy.
In April, the wording also changes with the bank hinting it was assessing rising inflation and would act on new information.
Pressure had been mounting for the bank to move in April.
"Inflation has picked up and a further increase is expected, but growth in labour costs has been below rates that are likely to be consistent with inflation being sustainably at target," Dr Lowe said.
"The Board will assess this and other incoming information as its sets policy to support full employment in Australia and inflation outcomes consistent with the target."
In the middle of an election, the RBA hiked the cash rate by 25 basis points to 0.35 per cent, conceding it had to move now in order to curb rising inflation beyond its target range.
"The board judged that now was the right time to begin withdrawing some of the extraordinary monetary support that was put in place to help the Australian economy during the pandemic," Dr Lowe said in May
"The Board will continue to closely monitor the incoming information and evolving balance of risks as it determines the timing and extent of future interest rate increases."
Over the next three months consecutive rate hikes were committed to bring down inflation which is expected to run 7.75 per cent by the December quarter.
Three 50 basis point hikes have occurred and brought the official cash rate to 1.85 per cent.
In his August statement, the governor outlined monetary policy was tightening globally and economic growth had been downgraded due to Ukraine, supply disruptions and lockdowns in China.
He also flagged housing consumption had become uncertain.
"Higher inflation and higher interest rates are putting pressure on household budgets," Dr Lowe said.
"Consumer confidence has also fallen and housing prices are declining in some markets after the large increases in recent years."
The RBA has also confirmed more rate hikes would be taken to bring down the level of inflation to the target range of 2 to 3 per cent.
"The size and timing of future interest rate increases will be guided by the incoming data and the Board's assessment of the outlook for inflation and the labour market."
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