Reserve Bank of Australia monetary policy decision and accompanying statement by Governor Lowe.
Full text:
Previous forward guidance pointed to more than one rate hike:
- “The Board believes that further rate hikes will be required in the coming months”
That guidance is softer today, suggesting at least one hike and then pre-assesses the data. And this high inflation is temporary.
Lowe’s testimony has downplayed hawkishness. His verdict (mine in bold):
- That’s what the board expects Further tightening of monetary policy is required to ensure that inflation returns to target and that this period of high inflation is temporary. In assessing when and by how much interest rates need to rise further, the Management Board will monitor developments closely in the world economy, trends in household spending and the outlook for inflation and the labor market. The Board remains committed to returning inflation to target and will do whatever is necessary to achieve this.
A touch less hawkish.
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Summary of headlines via Portal:
The Board remains committed to bringing inflation back to target levels
- The Management Board assumes that further tightening of monetary policy will be necessary
- The monthly CPI indicator suggests that inflation has peaked in Australia.
- Service price inflation remains high, with some services in high demand during the summer
- Board is keen to bring inflation back into the 2% to 3% target range while keeping the economy on a stable path, but the path to a soft landing remains narrow
- Australia’s economy has slowed
- There is uncertainty about the timing and extent of the slowdown in fiscal spending
- Household consumption growth has slowed due to tighter financial conditions
- Uncertainties mean there are a number of possible scenarios for the Australian economy
- The labor market remains very tight, although conditions have eased somewhat
- Wage growth continues to pick up in response to tight labor markets and higher inflation
- Recent data points to a reduced risk of a cycle in which prices and wages chase each other
- However, given the limited free capacity in the economy and the historically low unemployment rate, the board remains vigilant against the risk of a price-wage spiral
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Background to this:
And tomorrow the Governor of the Reserve Bank of Australia, Lowe, speaks:
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