RBA’s Lowe: Some further tightening required to ensure inflation returns to target within reasonable timeframe

Anil Panchal FXStreet

Early Friday morning in Asia, Reserve Bank of Australia (RBA) Governor Philip Lowe and a few Deputy Governors appeared before the House of Representatives Standing Committee on Economics.

Among the top-tier statements, RBA Governor Philip Lowe’s defense of the tighter monetary policy gained major attention as the Aussie central banker said, per Reuters, “It is possible that some further tightening of monetary policy will be required to ensure that inflation returns to target within a reasonable timeframe.”

The policymaker also refrained from cheering the victory on inflation while adding that things are in the right direction. It should be noted that RBA's Lowe highlighted fears of China's growth slowdown by citing it as a threat to the global economy.

RBA's Lowe showed confidence about inflation reaching the target while saying, "The worst is over."

Key statements

The Australian economy is currently experiencing a period of below-trend growth and this is expected to continue for a while yet.

The central scenario is that economic growth remains subdued for the rest of this year before gradually picking up to around 2.25% by the end of 2025.

We expect employment to continue to grow but below the rate of growth in the labor force.

Our central forecast is for CPI inflation to be around 3.25% by the end of next year and to be back within the 2–3% target range by late 2025.

Rates are restrictive so we are in calibration stage with policy.

Market reaction

The news fails to move a needle on the AUD/USD price as the quote remains pressured near 0.6515 by the press time, holding lower grounds at the weekly bottom after a volatile day.

Also read: AUD/USD: Strong yields keep bears hopeful of testing 0.6480 support, US data eyed

Author

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

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