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RBA Governor Lowe: Prepared to use unconventional policy if its warranted

  • Prepared to use unconventional policy if its warranted comments fail to sustain the downside in AUD/USD.
  • We are prepared to cut rates further to meet our inflation and employment goals - Lowe said.
  • It is unlikely but possible that we head to the lower bound; hope to avoid doing so.

RBA governor Lowe is appearing before the House of Representatives' Standing Committee on Economics in Canberra. He is delivering a prepared text and along with colleagues will be answering politicians’ questions for about 3 hours.

He is dovish but has just made the most dovish statement yet, something that the markets were looking for and he delivered:

  • Prepared to use unconventional policy if it's warranted.
  • It is unlikely but possible that we head to the lower bound; hope to avoid doing so.
  • RBA Governor Lowe: depreciation in the Australian Dollar is helping the economy.

Earlier comments:

  • We are prepared to cut rates further to meet our inflation and employment goals.
  • Having cut rates twice in quick succession. we thought it was appropriate to wait and asses developments.
  • Inflation still expected to pick up, but the date at which it is expected to be back at 2% has been pushed out again.
  • Over 2020, inflation is forecast to be a little under 2% and over 2021 it is expected to be a little above 2%.
  • Australian economy to grow 2.5% this year; downward revision reflects weak consumption growth.
  • There are signs the economy has reached a gentle turning point.
  • Inflation will be below target band for some time.
  • Probable we will have spare capacity in the labour market for some time yet.
  • Reasonable to expect an extended period of low rates.

FX implications:

Should weigh on AUD, but we are seeing quite the opposite. all the odds are stacked against the Aussie yet it is 0.15% up in the Asian shift and holding around the 200- hourly moving average.

Note: Later in the day, the RBA also releases its quarterly Statement on Monetary Policy at 11:30am Syd.

"Tuesday’s brief statement indicated fairly modest changes compared to May. The RBA’s “central scenario is for the Australian economy to grow by around 2½ per cent over 2019 and 2¾ per cent over 2020.” Inflation is expected to take longer to return to target, “a little under 2 per cent over 2020 and a little above 2 per cent over 2021," analysts at Westpac explained

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Ross J Burland

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

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