SOLID GOLD BERJANGKA | Australia’s central bank “will not hesitate” to raise interest rates further if there’s a material upgrade to its inflation outlook, new Governor Michele Bullock said, in her strongest reference yet to the threat of renewed price pressures.
“Our focus remains on bringing inflation back to target within a reasonable timeframe, while keeping employment growing,” Bullock said in a speech Tuesday. The RBA board meets on Nov. 7 to decide policy, with money markets seeing just under a 40% chance of a hike to take the cash rate to 4.35%.
While the RBA releases its updated quarterly forecasts three days after the rate decision, board members will have access to the numbers at the policy meeting.
“The board will not hesitate to raise the cash rate further if there is a material upward revision to the outlook for inflation,” Bullock said. At the same time, she added, it’s mindful that demand growth and the rate of inflation have been moderating, and there are long lags in policy transmission.
The RBA has paused at its past four meetings after raising rates by 4 percentage points between May 2022 and June this year. Third-quarter inflation data out Wednesday are expected to show a deceleration to 5.3% from 6% — still well above the 2-3% CPI target.
The central bank’s current forecasts predict headline prices will only fall back within the target band in late 2025. The RBA’s rate pause has allowed it time to assess the impact of tightening so far amid a mixed economic picture — consumers are downbeat while corporate confidence is holding up.
Retail sales show household spending is close to stagnating while a small, yet growing number of Australians are in the early stages of financial stress. On the flip side, the labor market persists in defying the RBA’s rate hikes with hiring staying strong and the jobless rate surprisingly sliding to 3.6% last month. The housing market has also staged a surprising rebound.
Bullock used her first speech as governor to restate the policy framework the central bank operates within and to highlight some of the tweaks that are being made following an independent review of the institution.
The RBA chief said she is working with Treasurer Jim Chalmers to “modernize and clarify” the RBA’s objectives of low and stable inflation and full employment after the review urged this mandate be made “more explicit.”
“These changes won’t, however, fundamentally change the way we formulate monetary policy,” Bullock said. “Over time, low inflation and full employment go hand in hand.”
There have been calls for the RBA to have a fixed numerical target for full employment, a move that would be “unwise,” according to the governor.
“For one, full employment can change over time, as the structure of our economy evolves,” she said. “It is also not a concept that can be directly measured. And it cannot be comprehensively summarized by a single statistic such as the unemployment rate.”
Source : Bloomberg, SOLID GROUP, SOLID GOLD BERJANGKA, PT SGB
Source : Bloomberg, SOLID GROUP, SOLID GOLD BERJANGKA, PT SGB
Source : Bloomberg, SOLID GROUP, SOLID GOLD BERJANGKA, PT SGB
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