RBA Governor Philip Lowe hints at slower rate hikes amid inflation fears

The head of the Reserve Bank of Australia has announced further rate hikes in the coming months.

RBA Governor Dr. However, Philip Lowe noted that the case for slower tightening becomes “stronger” as policy rates rise.

“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 labor market,” he told the Anika Foundation in Sydney on Thursday.

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Lowe’s speech followed another hike in interest rates by 50 basis points on Tuesday to tame rising inflation.

It was the fifth rate hike since May.

The central bank governor also took the opportunity to explain the board’s “very large forecasting error” to anticipate the surge in inflation.

“Forecasting errors of this magnitude should lead to soul searching by forecasters and they certainly have at the RBA,” he said.

He noted that the central bank is not the only one with inaccurate forecasts.

“Certainly, some forecasters have higher inflation than we expected, but the magnitude of the rise in inflation has surprised everyone,” he said.

Lowe laid out the reasons for the unexpected surge in inflation, beginning with the Russian invasion of Ukraine, which curtailed energy production.

He also said that demand for goods surged at a time when COVID disrupted production and thus supplies.

“As a result, many industries quickly found themselves on the sharply rising part of the supply curve and prices rose.”

Lowe said the housing sector is a good example of this trend.

“Very strong demand in this sector — partly due to low interest rates and government grants totaling up to $35,000 for some first-time homebuyers — met COVID-related issues on the supply side,” he said.

“The result has been a large jump in prices that has had a significant impact on the headline inflation rate in Australia.”

Philip Lowe has given a rare interview as the cost of living crisis escalates.

Philip Lowe has given a rare interview as the cost of living crisis escalates.

https://7news.com.au/business/money/rba-governor-philip-lowe-alludes-to-slower-rate-hikes-amid-inflation-fears-c-8167487 RBA Governor Philip Lowe hints at slower rate hikes amid inflation fears

James Brien

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