Reserve Bank of Australia Governor Lowe is giving testimony in parliament.

From his prepared remarks (Headlines via Reuters):

  • Now that inflation is as high as it is, we need to make sure that inflation returns to target in a reasonable time
  • Inflation has very quickly gone from being too low, to being too high
  • RBA is committed to returning inflation to the 2 to 3 per cent target range over time.
  • RBA will do what is necessary to make sure that higher inflation does not become entrenched
  • Seeking to do this in a way that keeps the economy on an even keel.
  • Medium-term inflation expectations have remained well anchored
  • Growth in labour costs remains consistent with inflation returning to target.
  • It is understandable that some people are questioning whether or not too much support was provided by the RBA over the past two years
  • Board expects that further increases will be required to bring inflation back to target. We are not on a pre-set path
  • At some point, it will be appropriate to slow the rate of increase in interest rates
  • Case for doing that becomes stronger as the level of interest rates increases.
  • RBA board judged during peak of covid pandemic that the bigger policy mistake would have been to do too little, rather than too much
  • Board and the bank's staff welcome rba review and we have already had constructive discussions with the review panel

Full text:

There will be an extended Q&A to follow

----

On these comments there is something for those forecasting a 50bp rate hikes at the next RBA meeting (October 4), and something for those forecast 25bp instead.

Lowe talking tough on the fight against inflation (the case for +50bp), for example:

  • Inflation has very quickly gone from being too low, to being too high
  • RBA is committed to returning inflation to the 2 to 3 per cent target range over time.
  • RBA will do what is necessary to make sure that higher inflation does not become entrenched

And for the +25bp side of the argument:

  • Seeking to do this in a way that keeps the economy on an even keel.
  • Medium-term inflation expectations have remained well anchored
  • At some point, it will be appropriate to slow the rate of increase in interest rates
  • Case for doing that becomes stronger as the level of interest rates increases.

    • So, what will it be? I'm a gonna wait until the Q&A, to see if there is more of pertinence before drawing conclusions.

    Philip Lowe rba