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Free AccessGovernor Lowe: Recent Trends In Inflation
- "Unless labour productivity growth is very weak, it is likely that wages will need to be growing at 3 point something per cent to sustain inflation around the middle of the target band. This doesn't mean that we have a target for wages growth or that wages growth is the only determinant of inflation. Rather, we are using wages growth as one of the guideposts in assessing progress towards our goal and whether inflation is sustainably in the target range. As we get closer to that goal, you could expect us to provide further guidance, including our projections for inflation."
- "The recent inflation data indicate that we are making better-than-expected progress towards our inflation objective. This is welcome news. But we still have a way to go. Underlying inflation has only just returned to the target range for the first time in six years and is only just above the bottom of that target range."
- "The inflation outlook is more uncertain than it has been for some time. But our central scenario is that underlying inflation reaches the middle of the target by the end of 2023. If this comes to pass, it would be the first time in nearly seven years that we will be at the mid-point. This, by itself, does not warrant an increase in the cash rate. As I have said, much will depend upon the trajectory of the economy and inflation at the time. It is still plausible that the first increase in the cash rate will not be before 2024."
- "There are, of course, other possibilities. It is possible that the global inflation shock is more persistent and that the rebalancing of consumption patterns does not result in an easing of inflation pressures. In addition, we have little historical experience as to how the Australian labour market works at an unemployment rate of 4 per cent. There is also the question of the effect on labour supply of the reopening of the international border. It is therefore possible that faster-than-expected progress continues to be made towards achieving the inflation target. If so, there would be a case to lift the cash rate before 2024. It is also possible that progress will be slower than expected, which would result in the cash rate staying at current levels for longer."
- "Finally, I would like to repeat a point I made a couple of weeks ago – that is, the latest data and forecasts do not warrant an increase in the cash rate in 2022. The economy and inflation would have to turn out very differently from our central scenario for the Board to consider an increase in interest rates next year. It is likely to take time to meet the condition we have set for an increase in the cash rate and the Board is prepared to be patient."
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Why MNI
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of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.