Reserve Bank of Australia Governor Lowe is speaking:
- to the Anika Foundation
- topic is "Inflation and the Monetary Policy Framework"
Earlier this week the Bank raised its cash rate target again. Rate hikes ahead are likely to slow somewhat:
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Speech headlines via Reuters:
- says further rate rises will be required but not on a pre-set path
- conscious of lags in operation of monetary policy and that rates have risen very quickly
- case for slower pace of rate hikes becomes stronger as the level of the cash rate rises
- but how high rates need to go and how quickly will be guided by data, outlook for inflation and labour market
- price stability necessary for a strong economy, sustained full employment
- sharp global slowdown would make it harder to achieve soft landing in australia
- recent data continue to suggest resilience in Australian consumer spending
- inflation expectations remain consistent with the inflation target
- a shift higher in inflation expectations will require higher interest rates
- in our national interest that we avoid this shift
- aggregate growth in wages has not yet responded materially to higher inflation
- flexible inflation targeting has served australia well, remains best monetary policy regime
- do not see a strong case for a move away from this broad approach
- worth examining arguments for and against a change to the 2-3% target range
- important we learn from our forecast mistakes on inflation
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Full text:
Inflation and the Monetary Policy Framework
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AUD fell a few points on the headlines. Bond yields dipped back a little also.
I think there is something for the hawks and the doves in those bullet points above.
Dovey:
- case for slower pace of rate hikes becomes stronger as the level of the cash rate rises
Hawkey:
- how high rates need to go and how quickly will be guided by data, outlook for inflation and labour market
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There will be a Q&A to follow.
