In the latest iteration of global central banks moving to cut interest rates, the Bank of Canada (BoC) announced a 50 basis point (bps) rate cut overnight, bringing the key rate to 3.75 percent.

The move follows back-to-back cuts of 25 basis points at the bank’s previous three meetings, with the BoC admitting further policy cuts are in store if the economy broadly develops in line with its latest forecast.

This comes as inflation looks comfortably within the target range with headline inflation at 1.6 percent and reduced average inflation at 2.4 percent.

And while inflation in Australia is forecast to head in the right direction – despite the International Monetary Fund warning it could rise to 3.6 per cent next year – the Reserve Bank is not expected to follow the BoC's path in the near term.

While overseas interest rate cuts give wind to those putting pressure on the RBA, GSFM investment specialist Stephen Miller explained that "there are enough differences between the Australian and Canadian economic environments and central bank practices that caution against doing too much much through parallels'.

In a recent market note, Miller said: “Where the RBA differs from other developed country central banks, including the Bank of Canada, is that it has shown reluctance to raise rates so far and so quickly.

"The consequence of Australia's relatively lower interest rate is relatively better labor market performance."

However, the downside is relatively "stickier inflation".

“A reasonable estimate of annualized average inflation in Australia for the September quarter is around 3.5 per cent. In Canada, the annual condensed average CPI increased by just 2.4 percent,” Miller said.

"And what that suggests is that in Australia downward adjustments to interest rates will lag behind those in other developed countries."

Economic developments since the RBA's last meeting in September, he said, "broadly confirmed the RBA's 'experiment' in taking a more cautious approach than its developed peers in raising interest rates."

"Such an 'experiment' was intended to minimize any displacement in the labor market." "Last week's strong labor market report confirms that the target has been reached," Miller said, but warned that this comes at the cost of a longer return of inflation to target.

"Nevertheless, the RBA board recognizes a risk that 'the pickup [in household spending] is slower than expected, leading to continued weak output growth and a sharper deterioration in the labor market." There is no evidence yet of this "sharper deterioration in the labor market," Miller said.

"However, such a deterioration is a non-trivial risk and one to which the RBA will certainly respond."

According to him, the RBA may soon be able to see a light at the end of the tunnel regarding inflation.

"If, as I suspect, labor market outcomes and inflation outcomes will be broadly in line with the RBA's forecasts, then the RBA can reasonably expect to cut rates in February," he said.

Earlier this week, the IMF said inflation in Australia would fall to 3% by the end of 2024, helped by subsidies such as energy rebates, before rising again to 3.6% by the end of 2025.

This contrasts with Reserve Bank forecasts which see inflation falling within the target range of 2-3 per cent by the end of 2025. and to approach the midpoint of the range by 2026.

Speaking to InvestorDaily on the matter, Miller said he was taking it "with a grain of salt".

"I prefer to believe the RBA's forecasts," Miller said, pointing out that the IMF's forecasts reflect core inflation, which includes the impact of subsidies.

"The re-acceleration looks a bit curious... As far as monetary policy is concerned, it's the reduced averages that matter most in any case and I don't have much reason to disagree with the RBA's forecasts."