Reserve Bank of Australia monetary policy decision and accompanying statement from Governor Lowe.
Full text:
The previous forward guidance indicated more than one hike ahead, with this:
- "The Board expects that further increases in interest rates will be needed over the months ahead"
This guidance today is milder, points to at least one hike and then assessing the data ahead. And that high inflation is transitory.
Lowe's statement has dialled down the hawkishness. His conclusion (bolding mine):
- The Board expects that further tightening of monetary policy will be needed to ensure that inflation returns to target and that this period of high inflation is only temporary. In assessing when and how much further interest rates need to increase, the Board will be paying close attention to developments in the global economy, trends in household spending and the outlook for inflation and the labour market. The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.
A touch less hawkish.
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Summary Headlines via Reuters:
- Board remains resolute in its determination to return inflation to target
- Board expects that further tightening of monetary policy will be needed
- The monthly CPI indicator suggests that inflation has peaked in Australia.
- Services price inflation remains high, with strong demand for some services over the summer
- Board is seeking to return inflation to the 2–3 per cent target range while keeping the economy on an even keel, but the path to achieving a soft landing remains a narrow one
- Growth in the Australian economy has slowed
- There is uncertainty around the timing and extent of the slowdown in household spending
- Household consumption growth has slowed due to the tighter financial conditions
- Uncertainties mean that there are a range of potential scenarios for the Australian economy
- Labour market remains very tight, although conditions have eased a little
- Wages growth is continuing to pick up in response to the tight labour market and higher inflation
- Recent data suggest a lower risk of a cycle in which prices and wages chase one another
- Board, however, remains alert to the risk of a prices-wages spiral, given the limited spare capacity in the economy and the historically low rate of unemployment
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Background to this:
- RBA Preview: Not out of the woods yet - BofA
- The RBA expected to raise its cash rate again on Tuesday, Gov Lowe speaks the next day.
- AUD traders heads up: RBA 'shadow board' recommends a 25bp cash rate hike on Tuesday 7 Feb
And, coming up, Reserve Bank of Australia Governor Lowe speaking tomorrow: