No rush to hike up rates
RBA boss won’t let overseas moves sway decision here
RESERVE Bank governor Philip Lowe says he feels no pressure from his increasingly hawkish counterparts overseas to alter the central bank’s rate-setting stance and hike the cash rate.
The RBA also appears prepared to look through the latest weak reading on price growth, showing inflation is below its target band following a surprise slide in the cost of petrol and food.
Dr Lowe said yesterday the shift towards rate hikes elsewhere in the world had “no automatic implications” for Australia’s cash rate.
“Just as we did not move in lock-step with other central banks when the monetary stimulus was being delivered, we don’t need to move in lock-step as some of this stimulus is removed,” he said.
“Our decisions will continue to be made within the framework of our mediumterm inflation target.”
His comments echo those of his deputy, Guy Debelle, who spoke late last week as the Australian dollar hovered around two-year highs. Speaking at the annual Anika Foundation lunch in Sydney, Dr Lowe sought to connect the dots between the workforce and wage pressures.
He pointed out globalisation had increased competition for jobs, meaning workers were less likely to drive a hard bargain for a payrise.
Dr Lowe’s comments came as weaker-than-expected quarterly inflation figures took some of the heat out of the Aussie. Headline inflation grew just 0.2 per cent during the three months to June, undershooting market expectations for a 0.4 per cent lift.
It also left the CPI at 1.9 per cent for the year to June – down from 2.1 per cent three months earlier and back outside the RBA’s target band of 2 per cent to 3 per cent.
Underlying inflation, which strips out volatile items such as petrol and tobacco, was up 0.5 per cent for the quarter for an annualised pace of 1.8 per cent – a touch higher than the March figure.
The Aussie slid back through US79c after the ABS released the figures.