Institutional Economics

Institutional Economics

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Institutional Economics
Institutional Economics
Measuring uncertainty and its economic implications

Measuring uncertainty and its economic implications

Uncertainty is quantifiable and not all that uncertain in its effects

Stephen Kirchner
Jun 07, 2025
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Institutional Economics
Institutional Economics
Measuring uncertainty and its economic implications
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The minutes of the RBA's May Board meeting elaborate on the rationale for the 25 basis point reduction in the official cash rate and indicate the Board also considered the merits of a 50 basis point cut. A larger cut was favoured by some market participants, partly with a view to getting out in front of any tariff-induced downturn.

As is characteristic of the early stages of a new policy cycle, the RBA leaned less heavily into the inaction virtue words in May, which is what we would expect when the RBA is bringing its policy instruments to bear on the cycle, rather than waiting passively for the cycle to come to it (thanks to Matt Cowgill for his R package for reading RBA text).

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