Queen Elizabeth’s body at Westminster; Anthony Albanese goes to London; Xi Jinping and Vladimir Putin meet in Uzbekistan; Julia Gillard talks about the debate on the republic; Sydney drives industrial action; US inflation bites
There will be further interest rate hikes, confirmed RBA Governor Philip Lowe, but the size and pace of those hikes are not set in stone and will respond to changing data.
“The RBA will do what is necessary to ensure that rising inflation does not become entrenched and we are committed to bringing inflation back to the target range of 2-3%,” he told the parliamentary committee on economic affairs.
“At some point it will be appropriate to slow the rate of interest rate increases and the case for such a measure becomes stronger as the level of interest rates rises.
“As I have said previously, the magnitude and timing of future interest rate increases will be guided by incoming data and the Board’s assessment of the outlook for inflation and the labor market.”
One source of uncertainty is consumer spending, Lowe said. Consumer confidence is low and disposable incomes are under pressure from higher inflation as house prices fall. But some households are also benefiting from a buoyant job market, and many continue to save at a higher rate than before the pandemic.
“Faced with these competing factors, recent data suggests spending has remained resilient so far,” he said.
“There is, however, considerable uncertainty as to how these factors will balance out over the coming months and we are carefully monitoring the situation.”
It will also be important to ensure that stronger wage growth does not increase inflation, Lowe added.
The RBA boss said at the next meeting in early October that the board would consider increases of 0.25 or 0.5 percentage points.
“The fact that we have raised interest rates a lot already increases the strength of the argument for smaller increases in the future. We are now closer to the normal framework, which means that the arguments for large adjustments and interest rates are less important.