Given the recent uptick in inflation to 3.8%, this week's decision by the RBA to keep the cash rate steady at 3.60% surprised no one. It certainly didn't surprise two fund managers, Nick Chaplin from Seed, and Renny Ellis from Arculus Funds Management, who regularly join us either for a preview of the RBA's decisions, or in this case, if not a post-mortem, then at least a review.

You can hear their comments in the video below, and neither held back from making the point that, in their opinion, the RBA had erred by cutting rates too quickly back in August, although neither attributed that decision to the pressure the board was under at the time from all quarters, including the media and Treasurer Jim Chalmers. However, they were both clear in pointing out that not only had they been of the view in August (and for some time before) that inflation hadn't been tamed, and that there was a high risk the board had acted too quickly, given the uncertainty around the data and particularly the effect of the various electricity rebates that were due to expire.

As Nick Chaplin pointed out, the benefit of hindsight is a wonderful thing, and no doubt the combined board would be wishing they had been more patient.

Looking forward, neither were prepared to categorically forecast a rate rise next year, certainly not at the RBA's next meeting due in February, but they also didn't rule the possibility out for later in the year... depending on the numbers.

Meanwhile, Tuesday's RBA decision, along with last week's inflation result, and yesterday's steady employment numbers, must have caused some red faces among the major banks' economic departments, even if they didn't admit to publicly misreading their collective crystal balls. As Nick pointed out, back in August, the CBA's economic forecast was for three more rate cuts this cycle.

Oops!

Maybe we have to accept that unless the economy dives, most likely as a result of unemployment moving up towards 5%, the RBA's inflation target range of 2-3% may either be optimistic, or a long way off.