The Reserve Bank of Australia (RBA) will not adjust the policy rate when it meets today.

The data flow since the August meeting has consistently surprised on the downside when it comes to any calibration of inflation pressures.

The release of the July monthly consumer price index (CPI) indicator last week was just the latest instalment. It followed the June quarter wage price index which revealed modest wage growth and a softer labour market (employment/unemployment data) for July (albeit one that followed very strong reports in May and June).

Put simply, the ‘data dependence’ criterion makes the case for any increased policy rate at today’s meeting too difficult for the RBA to prosecute.

Ongoing China weakness just adds to the case.

Of course, the Governor’s Statement accompanying Tuesday’s decision will be keenly parsed by the financial market commentariat in order to gauge the likelihood that the RBA has reached the end of the current cycle of policy rate increases.

That notion would have been excited by the August RBA Board meeting minutes that noted RBA Board members observed a “credible path back to the inflation target with the cash rate staying at its present level.”

I have my doubts regarding the existence of such a “credible path”.

For one thing, the CPI indicator does not capture the full CPI basket, being heavily weighted to goods. July’s figure of 4.9 percent reflected ongoing goods disinflation but little of still-high services inflation.

For another thing, there appears to be an emergent tendency for more wage increases to occur at the start of a new financial year, not the least reflecting the recent Fair Work Commission wage review decision that takes effect from 1 July.

That circumstance presages a potentially meaningful acceleration of wage pressures in the second half of the year and probably means the August and September monthly inflation numbers and the September quarter CPI release (released late October) reveal some reacceleration of inflation or at least unwelcome “stickiness”.

In that context, I am still not convinced that the RBA forecasts released with the August Statement on Monetary Policy (SoMP) adequately reflect the upside risks to inflation generated by the FWC decision.

I am also a little surprised that the RBA chose to employ the “credible path” terminology. The articulation of such a notion might be self-defeating as it risks a perceived diminution in the RBA’s inflation focus among markets and other economic actors (businesses, workers, householders and potential house buyers). This seems to me another example of the RBA ‘over-communicating’.

In response to questioning after her recent Sir Leslie Melville address, incoming RBA Governor Michele Bullock affirmed that her “first priority is still to maintain a focus on bringing inflation back down to target,” and further that the RBA may need to raise rates again but will “be taking decisions, … until next year at least, month by month.”

That is a more sensible approach, and her sentiments are well framed. Certainly, it is preferable to the “credible path” terminology in the August minutes.

Ms Bullock is keenly aware that there are simply too many “unknowns“ for her to issue a more definitive commentary on how the RBA might approach monetary policy for the remainder of 2023. The pitfalls of being too definitive in such guidance blighted her predecessor’s term as Governor.

The financial market commentariat borders on incessant in its demands for more communication from central banks. But central banks’ ability to communicate meaningfully is limited by its information set, which in many instances is not that different from that circulating in financial markets. In this context, it is not the quantity of central bank communication that matters but its quality.

Ms Bullock’s first foray into the communication sphere is in this sense a step in the right direction.

But reverting to today’s RBA decision, it is probably unavoidable that a decision to leave the policy rate unchanged will excite the notion that the RBA has reached the end of the current cycle of policy rate increases.

That might be accentuated by a similar “skip” in October.

But come the September quarter price and wage data we might witness a renewal of some anxiety on inflation as November looms!

Stephen Miller is an Investment Strategist with GSFM. The views expressed are his own and do not consider the circumstances of any investor.