Reserve Bank of Australia Governor Lowe is speaking on:
- Inflation, Productivity and the Future of Money
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Headlines via Reuters:
- Welcome the announcement today by the government of the details of the review
- CPI for the June quarter will show a further step-up in inflation rate, another step-up is expected later this year
- Stronger productivity growth is likely to mean a higher neutral real interest rate
- Recent trends in productivity growth have not been particularly encouraging,
- We don't need to return inflation to target immediately
- We do need to chart a credible path back to 2–3 percent
- Important consideration is how inflation expectations and the general inflation psychology in the community evolve
- Possible to do this, but the path ahead is a narrow one and it is clouded in uncertainty
- Neutral nominal rate is at least 2½ per cent. It would be higher than this if medium-term inflation expectations were to shift higher.
- Emphasise that the concept of the neutral rate is no more than one reference point for the board.
- The path back to 2–3 percent inflation requires an increase in supply and some moderation of demand
- Neutral is not the basis of a mechanical rule and we are not on a pre-set path to achieve any specific level of the cash rate
- Board expects that further increases will be required over the months ahead
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Lowe, and the Bank, have their eye on how households will respond to higher interest rates and higher prices. His 'narrow path' that is 'clouded in uncertainty' remark is accurate. While the RBA is trying to navigate this path they'll also be navigating a review into its operations. I reckon this is going to get real ugly for the RBA and Australia before it gets better.
There will be more from Lowe ahead in the Q&A session. I'll have more to come on this separately
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Full text:
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Live audio is available from here :
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Where the RBA cash rate is currently at:
