Lowe Stresses Bank Not On Pre-Determined Path, Tips Hat To Potential Cuts In ‘24

RBA Governor Lowe’s testimony before the House of Representatives Standing Committee on Economics has concluded.

• The opening statement generally went over old ground, stressing that the Bank expects further rate rises in the months ahead, underscoring the risk of not taming inflation.
• The tweaks to the Bank’s January statement were deemed an “evolution, not a revolution,” while Lowe highlighted the need to signal clarity that the Bank is “not done yet.” The Bank is also clearly cognisant of the lagged impact of the already delivered tightening, pointing to the impact lasting well into ’24.
• Interestingly, Lowe highlighted the idea that the Bank is not on a pre-determined path, with data guiding its decisions. This comes after the Feb post-meeting statement once again removed any reference to “not being on a pre-set path” from the guidance paragraph, which the market and sell-side took as a hawkish signal.
• RBA Assistant Governor (Economics) Ellis noted that the labour market is not quite as tight as it was a few months ago, while Lowe flagged that yesterday’s labour market report will not impact forward guidance, but conceded that another soft print would trigger a re-assessment (with the various abnormalities in the data highlighted).
• Lowe pointed to strong domestic demand supporting goods inflation, as well as the big difference in realised trimmed mean CPI in Q4 vs. RBA exp.
• The RBA has also received signals that wage growth is picking up once again, although firms have told the Bank that ’24 pay rises won’t be as sizable.
• Lowe concluded the Q&A by suggesting that it is plausible that rate cuts could be in play in ’24, although noted that a lot “has to go right” for that to be realised.