RBA governor Philip Lowe warns inflation is still too high and failing to bring it under control will only contribute to further interest rate rises.
The Reserve Bank is closer to pausing interest rate rises, Governor Philip Lowe has promised, as he cautioned home buyers that inflation is still too high and needs to be brought down “fairly soon”., to an 11-year high of 3.6 per cent, Lowe used a speech in Sydney on Wednesday morning to argue more rate rises were still on the horizon.
“Our judgment, though, remains that further tightening of monetary policy is likely to be required to bring inflation back to target within a reasonable timeframe,” he said.“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. If we don’t get inflation down fairly soon, the end result will be even higher interest rates and more unemployment.
Lowe said at every RBA board meeting, the bank was trying to manage two risks - not doing enough to bring down inflation and doing too little that would mean inflation remained too high for too long. “The unemployment rate is around a five-decade low. Australia’s terms of trade are close to their highest level ever. There has been a record boost to savings over recent years and interest payments as a share of household income will soon be at a record high.“At the same time, measures of consumer confidence are as low as they have been in a long while. This all means that there is range of scenarios for the economy and there are uncertainties in both directions.
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