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RBA’s Lowe: Aggressive rate hikes result in higher unemployment
Reserve Bank of Australia (RBA) Governor Philip Lowe adds more comments while speaking in front of the House of Representatives Standing Committee on Economics. After initially citing fears of higher inflation and readiness to lift the rates, the policymaker defended the latest status quo by citing the fears of raising rates too quickly to push inflation toward the target. The policymakers said that such a step would have resulted in higher unemployment. RBA’s Lowe also said, per Reuters, “To get inflation to target in 2024 would require substantially higher rates, not in the national interest.” Market ... (full story)
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The RBA’s main focus over the past year or so has been to get on top of the highest inflation rate in more than 30 years. We have made progress here and things are moving in the right direction, but it is too early to declare victory. At the previous hearing, I spoke about why it was so important that inflation returns to target and that we ensure this episode of high inflation is only temporary. I would like to reinforce that message today. High inflation is corrosive to the healthy functioning of the economy and it makes life more difficult for everybody, especially those on low incomes. It increases income inequality and eats away at people’s hard-earned savings. And, if high inflation does become ingrained in people’s expectations, history teaches us that the end result is even higher interest rates and even greater unemployment to bring inflation back down. It is for these reasons that the Reserve Bank Board remains resolute in its determination to return inflation to the 2–3 per cent target range within a reasonable timeframe and will do what is necessary to achieve that outcome. Inflation in Australia peaked late last year at 7.8 per cent. Since then, it has declined to 6 per cent and we expect further declines over the quarters ahead. Our central forecast is for CPI inflation to be around 3¼ per cent by the end of next year and to be back within the 2–3 per cent target range by late 2025. Within the aggregate inflation figures there are divergent trends, as there are overseas. Goods price inflation has slowed considerably as supply chain issues have been resolved and the demand for goods has eased. By contrast, the prices of many services are continuing to increase strongly and the momentum in rent inflation is particularly strong. There are also large increases in electricity prices taking place in many parts of the country. Another common feature across countries is that the high level of demand for goods and services has meant that labou post: RBA'S GOV. LOWE: ADDITIONAL TIGHTENING OF MONETARY POLICY MAY BE REQUIRED TO GUARANTEE THAT INFLATION RETURNS TO TARGET WITHIN A REASONABLE TIME FRAME. post: RBA’s Lowe: Things Central Forecast Is For #CPI #Inflation To Be Around 3.25% By End-2024, Back Within 2% – 3% Target Range By Late-2025 - Central Scenario Sees Subdued Economic Growth For Rest Of 2023 Before Gradually Picking Up To Around 2.25% By End-2025 post: RBA'S LOWE: WE EXPECT EMPLOYMENT TO CONTINUE TO GROW, BUT BELOW THE RATE OF GROWTH IN THE LABOUR FORCE #News #Markets #RBA #live post: RBA'S GOV. LOWE: THINGS ARE IMPROVING, BUT IT IS TOO EARLY TO DECLARE VICTORY OVER INFLATION.
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- Posted: Aug 10, 2023 9:05pm
- Submitted by:Category: Low Impact Breaking NewsComments: 0 / Views: 2,400
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