RBA's Lowe Q&A: I think markets have overreacted to recent inflation data

RBA governor, Philip Lowe, remarks in the Q&A session

• Market pricing not consistent with our reaction function
• Extremely unlikely for inflation to jump well beyond RBA projections, warranting earlier rate hikes (he's talking about that in 2022)
• Quite plausible that robust demand slows and supply chain issues resolve itself over time as global conditions pick up
• Wage growth still undesirable as compared to elsewhere in the world
• Things will have to change dramatically for central scenario to be adjusted forward
• RBA central projections were prepared a week ago
• Current market pricing on rates has very little impact on RBA central projections

There is an interesting question on the whether the shift in guidance means that the RBA is seeing its tolerance on inflation weakened. Lowe pretty much sidestepped that by reiterating the RBA's central projection scenario and outlined risks of inflation overshooting and undershooting. It's subtle but it does say a lot in my view.