Lowe Reaffirms Need For Further Rate Rises

Not much to shock in the newswire headlines covering the latest speech from RBA Governor Lowe (on “Inflation and Monetary Policy”). Lowe has reiterated that Australians should be prepared for further interest rate rises, while noting that rates are still very low for an economy with low unemployment and high inflation.

• When it comes to the 50bp rate hike deployed earlier in June, Lowe notes that “in June, we decided to make a bigger, 50 basis points, adjustment on the basis of the additional information suggesting a further upward revision to an already high inflation forecast. The Board also gave consideration to the fact that the level of interest rates was still very low.”
• Lowe has also stressed that the Bank is not on a pre-set path when it comes to monetary policy: “How fast we increase interest rates, and how far we need to go, will be guided by the incoming data and the Board's assessment of the outlook for inflation and the labour market.”
• Lowe reiterates the Bank’s willingness to do what it required to maintain the anchoring of inflation expectations, while once again deploying a warning re: a further uptick in inflation during the remainder of ’22, once again pointing to 7% inflation in Q422.
• Focus will move to the Q&A when the initial address is completed.
• Aussie bonds and AUD are ultimately little changed over Lowe’s comments, with a modest extension lower when it comes to the early Sydney weakness in Aussie bond futures.