RBA Governor to speak on economic outlook

0

A speech from the central bank chief could offer more clues about how fast and how high interest rates will be.

Reserve Bank of Australia Governor Philip Lowe is due to speak on Thursday about the direction of the economy and the role of monetary policy.

His speech follows another rate hike this week, the fifth in a row, in a bid to rein in soaring inflation.

Dr Lowe made it clear that there will be further rate hikes in the coming months, while noting that the bank was “not on a predefined path”.

Based on a slight shift in rhetoric, some economists believe the central bank could begin to ease its policy tightening and perhaps pause hikes to see the impact of its decisions.

Commonwealth Bank economists expect Tuesday’s 50 basis point hike to be the last oversized hike in this tightening cycle and expect a 25 basis point increase in October to carry the cash rate at 2.60%.

“This is around the RBA’s estimate of the neutral level – a cash rate level that is not seen as too stimulative or restrictive for the economy – given the recent easing in economic data and the deterioration sentiment,” said CommSec economist Ryan Felsman.

However, economists believe there is a chance that the cash rate will hit 2.85% by the end of the year.

The latest RBA decision has also prompted calls for Dr Lowe to resign.

Greens and Nationals senator Matt Canavan has called on the central bank boss to resign because he promised rates would not start rising until 2024.

The Labor government has rejected the suggestion, with Treasurer Jim Chalmers arguing that it is not up to him to “guess the decisions made by the Independent Reserve Bank”.

“They have an important and difficult job to do, as does the government, and I am focused on the government’s job,” he told reporters.

While rate hikes did little to dampen growth figures in June – with GDP rising 0.9% in the June quarter – economists expect the effects of policy tightening appear in the following trimester.

Share.

Comments are closed.