MNI POLICY: RBA Governor Lowe Defends Inflation Targeting

By Lachlan Colquhoun 

     SYDNEY (MNI) - Reserve Bank of Australia Governor Philip Lowe has defended

the Bank's inflation targeting as a key plank of monetary policy, saying

"shifting the goalposts" could undermine credibility.

     At a speech delivered in Sydney Thursday, Lowe addressed the issue of

inflation targeting in the current context of atypically low inflation across

most developed economies.

     Lowe said lowering the target might allow the bank to achieve a short term

goal, but it could also "entrench a low inflation mindset."

     According to Lowe, an inflation targeting regime should comprise four

elements:

     - A clear and credible medium-term nominal anchor for the economy

     - It should be "nested within the broader objective of welfare

maximization"

     - The target should have a degree of flexibility

     - The target should be accompanied by a high level of accountability and

transparency.

     The RBA has long had an inflation target of between 2% and 3%, while the

current annualised figure is 1.3%.

     The full text of Lowe's speech is available here:

https://www.rba.gov.au/speeches/2019/sp-gov-2019-07-25.html

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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