Reserve Bank governor Philip Lowe has signalled interest rate rises will be smaller in coming months, but warned the bank will do what it takes to fight the scourge of inflation. | rachelclun and swrighteconomy
Reserve Bank governor Philip Lowe has signalled interest rate rises will be smaller in coming months, but warned the bank will do what it takes to fight the scourge of inflation.
Inflation is currently at 6.1 per cent and is expected to reach 7.75 per cent by the end of the year. Lowe said the increase in interest rates from the historically low 0.1 per cent during the pandemic was to make sure that inflation does not stay high for long.“This is a very big change and a very large forecast miss,” he said, but pointed out that central banks in the European Union, US, Canada and UK also vastly underestimated the rate of inflation for this year.
“If workers and businesses come to expect higher inflation, and wages growth and price-setting behaviour adjusts accordingly, the task of navigating that narrow path will be very difficult, if not impossible,” Lowe said. “But how high interest rates need to go and how quickly we get there will be guided by the incoming data and the evolving outlook for inflation and the labour market.”
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