Research Discussion Paper – RDP 2026-06 Perceived Monetary Policy Rules: Evidence From Professional Forecasters in Australia

We study how professional forecasters perceive a central bank's reaction function, and how those perceptions evolve over time, using survey data from Australia between 2015 and 2025. Adapting recent survey-based approaches, we recover time-varying perceived policy rules that map expected macroeconomic conditions into expected policy rates. We find that perceived responsiveness to inflation was modest prior to the pandemic, reflecting views that rates would not be cut to tackle low inflation. The perceived responsiveness then rose sharply after sustained policy tightening began in 2022. Central bank communication about labour market conditions and financial stability shaped perceptions of the reaction function over these periods. However, during the elevated period of uncertainty following COVID, beliefs about the importance of inflation adjusted only after forecasters observed realised policy actions, highlighting the limits of communication alone. We also show that heterogeneity in long-run beliefs, including views about long-run inflation, plays an important role in shaping interest rate expectations, but can be parsimoniously captured using forecaster fixed effects.