Justin Smirk, Research Analyst at Westpac, notes that RBA Governor, Philip Lowe, at the ECB Forum on Central Banking has reminded the audience that the RBA has a triple mandate but also believes that household debt is still more important than low inflation.
Key Quotes
“Governor Lowe opened his comments with the observation that he felt he was the odd one out; a central bank governor that had not experienced negative interest rates, had avoided implementing QE and does not provide forward guidance.”
“But he then noted the striking similarity in the Australian economy with most other economies in that inflation is presently low, or the target range, and that wage outcomes continue to disappoint despite a tightening labour market.”
“His most important points were in reference to observations that are quite unique to Australia.”
“The first was that he reminded everyone that the RBA does not have a single, or even double, mandate but a triple mandate. They are price stability (as defined by the stability of the currency), full employment, and the economic prosperity and welfare of the Australian people.”
“He stressed this as why he was comfortable with inflation being under the band and felt no pressure to cut rates in the hope it might stimulate more inflation.”
“With wages growing at just 2%yr the Governor noted that with productivity it is very likely that inflation will continue to undershoot the target for some time. In this case, he argued, that patience was the best policy.”
“If there is any policy takeout it is that the Governor was emphasising a clear on ‘hold for as long as required’ policy stance.”
“The RBA is clearly comfortable with the current settings and it does not believe that it is in the interest of the welfare of the nation to propose a rate cut any time in the foreseeable future.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.