RBA Gov Lowe says risk if sticky inflation materialises would need tighter policy

<p>Reserve Bank of Australia Governor Lowe in his final public speech as Governor. Deputy Governor Bullock takes over as the new head of the Bank on September 18. </p><p>The title of Lowe's speech today is "Some closing remarks". If you would like to listen live, <a href="https://rba.livecrowdevents.tv/SpeechbyPhilipLoweGovernorAnikaFoundation7sept" target="_blank" rel="nofollow noopener noreferrer">the link is here</a>. </p><ul><li>
My recent focus is risk wages, profits run ahead of rates consistent
with return to inflation target</li><li>If this risk
materialised and inflation became sticky, would require tighter
monetary policy</li><li>Will be difficult to
return to the earlier world in which inflation tracked in a very
narrow range</li><li>Inflation is likely
to be more variable around target</li><li>Australia has been
well served by a flexible inflation target</li><li>Possible that
Australia can sustain unemployment rates below what we have had over
the past 40 years</li><li>Now in an
environment of stronger growth in nominal wages, which is positive</li><li>The recent
productivity record isn’t encouraging; solution fundamentally a
political problem</li><li>Interest rates
influence housing prices, but are not reason Australia has some of
the highest prices in the world</li><li>Issue that defined
my term more than any other was forward guidance on rates during the
pandemic</li><li>Guidance was widely
interpreted as a commitment, rather than a conditional statement</li><li>With the benefit of
hindsight, my view is that we did do too much during pandemic</li></ul><p>Lowe is holding on to the optionality of further rate rises if required. For the past 3 meetings, the Bank has held the cash rate unchanged at 4.1%. The next official quarterly inflation report is due on October 25, with a policy meeting following on November 7. If the inflation report is uncomfortable for the Bank the November meeting will be in play. Its unlikely we get a move before then. </p><p>AUD/USD is little changed after the Chinese trade data and Lowe's speech. </p><p>–</p><p>Full text is here:</p><ul><li><a href="https://www.rba.gov.au/speeches/2023/sp-gov-2023-09-07.html" target="_blank" rel="nofollow">Some Closing Remarks</a></li></ul><p>–</p><p>As a side note, in 2024 the RBA schedule of meetings will change significantly, </p>

This article was written by Eamonn Sheridan at www.forexlive.com.