Thursday, 17 August, 2017

RBA Chief Says Rate Cut To Stimulate Inflation Risks Financial Stability

The rule of thumb according to research by the Reserve Bank of Australia is that a 10 per cent change in the currency AUD/USD: A Correction Lower Is Overdue; Above 0.80 To Be Met With RBA Opposition – BTMU
Debra Rodriguez | 28 July, 2017, 00:51

But at a recent Australian Business Economists lunch in Sydney, Reserve Bank Governor Philip Lowe downplayed the chances of a rate rise so soon, saying that global trends wouldn't necessarily dictate Australia's economic path.

Not even the increased costs of some fruit and vegetables brought about by Cyclone Debbie or post January sales moves in clothing and footwear were enough to push consumer prices and the cost of living up enough to pop the consumer price index enough to offset the deflation impacts in other areas.

The Pound Sterling to Australian Dollar exchange rate is trending 0.3% higher at 1.6477 (26-07-17 10:30).

Australia's top central banker said on Wednesday he was "very comfortable" with keeping interest rates at record lows, as inflation fell short of expectations yet again.

For now, the RBA remains neutral on the outlook for policy, with the official interest rate stuck at a record-low 1.5% since August previous year. A stronger local currency could mean a 0.5% drop in core inflation over the next three years, according to the central bank's currency modelling.

While young Australians might have NFI who a NASDAQ is or how much one stock costs, we have a deep knowledge of the foreign exchange market - exclusively for the objective of buggering off when the temperature gets slightly chilly.

'Just as we did not move in lockstep with other central banks when the monetary stimulus was being delivered, we don't need to move in lockstep as some of this stimulus is removed'.

Reserve Bank Governor Philip Lowe has hosed down the hawks.

Lowe said the numbers were in line with the RBA's expectations, pointing to Australia's subdued wages growth as the key factor keeping inflation below target.

"If wealth and income equality is more dispersed, then it might be harder to get policies that appeal to the middle ground, so that's the political aspect", Lowe said. This has no automatic implications for monetary policy in Australia.

"It has become more pronounced in the past few years because of the of the rise in assets prices and people that own those assets have seen their wealth go up", he said.

Westpac suggested that "the more significant observation was the lack of price pressure in some major retail sectors and in particular, clothing & footwear".

Data from the Australian Bureau of Statistics revealed that pushing price increases in the last quarter were health care, taxes on tobacco and house buying. The policy rates in both the United States and Canada still remain below that in Australia.

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