MNI: RBA Lowe: Likely Next Rate Move Will Be Up, Not Down

By Sophia Rodrigues

     SYDNEY (MNI) - The Reserve Bank of Australia expects the next move in

interest rate to be up, rather than down, following recent developments globally

and locally, but doesn't think rates need to move in lock-step with global

central banks, Governor Philip Lowe said Thursday.

     Lowe made the comments in his prepared remarks to the A50 Australia

Economic Forum dinner in Sydney.

     The central message from his remarks was the same as that in the cash rate

statement published Tuesday, where the RBA signalled the cash rate will be on

hold for longer until progress is made on both unemployment and inflation

fronts. 

     But there was greater clarity on the inflation target, with Lowe signalling

that the RBA is targeting the mid-point of the 2% to 3% inflation target band.

     --HIKE AFTER PROGRESS

     Once the RBA makes progress on both those fronts, it will see it

appropriate to raise interest rates, Lowe said. But because the progress will be

only gradual, interest rate moves will also be gradual.

     "Given recent developments in Australia and overseas, it is likely that the

next move in interest rates in Australia will be up, not down," Lowe said.

     "If this is how things play out, the likely timing will depend upon the

extent and pace of the progress that we make. As I have discussed, while we do

expect steady progress, that progress is likely to be only gradual," he added.

     Lowe said the RBA expects consumer price index inflation to be in the 2% to

2.5% range over the next couple of years but underlying inflation which is the

RBA's preferred measure is "expected to be a bit lower than CPI inflation."

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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