SYDNEY, Mar 8 (NNN-AAP) – Australia’s inflation is likely to remain higher than the target for a few years, while a pause in interest rate hikes is coming closer, Reserve Bank of Australia (RBA) Governor, Philip Lowe, said.
Lowe made the remarks this morning, during the second day of the Australian Financial Review Business Summit held here, after a 10th straight increase took the bank’s official cash rate to a record high 3.6 percent since May, 2012.
The judgment remains that further tightening of monetary policy is likely to be required, to bring inflation back to target within a reasonable timeframe, Lowe addressed the summit.
Inflation is still too high and while it looks to be on a declining path, it is likely to remain higher than target for a few years, the governor of Australia’s central bank warned, “If we don’t get inflation down fairly soon, the end result will be even higher interest rates and more unemployment.”
In the Dec quarter, Australia’s headline inflation rate reached 7.8 percent, which is the highest level in more than three decades.
Though the monthly consumer price index (CPI) indicator, published last week, showed a “welcome decline” from 8.4 percent in Dec, to 7.4 percent in Jan, Lowe argued that, it will take some time before the “still too high” inflation gets back within the 2-3 percent target range.
Meanwhile, he also revealed that, at yesterday’s RBA board meeting, experts discussed the lags in monetary policy, the effects of the large cumulative increase in interest rates since May, and the difficulties that higher interest rates are causing for many households.
“We also discussed that, with monetary policy now in restrictive territory, we are closer to the point where it will be appropriate to pause interest rate increases, to allow more time to assess the state of the economy,” Lowe said.
“At what point it will be appropriate to pause will be determined by the data and our assessment of the outlook,” he said, noting that the board is carefully monitoring the data, month to month, with the flexibility to respond as needed.– NNN-AAP
