Reply To: RBA Suprises Raising Rates to Ten Year High 3.85%, Warns on Further Tightening


Reserve Bank of Australia Governor Lowe

Speaking at Australia’s National Press Club in Sydney.

Decision to hold rates steady does not imply interest rate rises are over
Board expects that some further tightening of monetary policy may well be needed
Prudent to hold rates steady this month to allow more time to assess impact of past increases
At our next meeting, we will again review the setting of monetary policy and updated forecasts
Board is conscious monetary policy operates with a lag, of economic uncertainties
Pause is consistent with our practice in earlier rate cycles
Was common to move rates multiple times, then wait for a while and move again if necessary
Increasingly clear higher interest rates are having an impact on household spending
Wage outcomes have been consistent with inflation returning to target
Recent high inflation has not been driven by excessive wages growth
Inflation has not been driven by ever-widening profit margins
While supply-side factors are influencing how fast inflation declines, they cannot be a reason to tolerate higher inflation on an ongoing basis

Important for govt to return budget to balance over medium term
Board prepared to have slightly slower return to inflation target than some other central banks
Getting inflation down faster would lead to more job losses
Not 100 percent certain will have to raise rates again
If we hold rates in may, that does not mean we will not move later
Premature to be talking about rate cuts
Balance of risks lean toward further rate rises