MNI BRIEF: There's A Risk In RBA Raising Rates Early - Lowe

Reserve Bank Governor Philip Lowe on Wednesday said there is a risk of Australia moving too early to tighten monetary policy, endangering the opportunity for the economy to secure the lowest rate of unemployment in "some decades".

In a speech in Sydney, Lowe said that while recent lifts in inflation had brought it “closer to the point where inflation is sustainably in the target range”, it was “not yet at that point,” see: MNI INTERVIEW: RBA's Harper Says Wages Need 4% Growth.

Lowe said although underlying inflation is at the midpoint of the RBA’s 2% to 3% target range for the first time in over seven years, Australian inflation was not being driven by the same forces as in other developed economies such as the U.S. However, he said the Russian invasion of the Ukraine had the potential to add to supply side shocks, but Australia was in a position where the prices of many of its export commodities were rising. “This means that our terms of trade will rise over the months ahead, which will provide a boost to our national income,” Lowe said.