Australia’s central bank says it’s closer to pausing rate hikes

sydney: Australia’s central bank governor said on Wednesday (March 8) that it is closer to halting its aggressive cycle of interest rate hikes as policy is now in hawkish territory, hinting a halt could come as early as April.

Reserve Bank of Australia (RBA) Governor Philip Lowe reiterated that further tightening would likely still tame inflation after he pushed interest rates to an 11-year high of 3.60% at a monetary policy meeting on Tuesday. had raised.

However, Lowe noted that the board had discussed the long delays in monetary policy, the impact of the 10 rate hikes already implemented and the impact of higher borrowing costs on households.

“We also talked about how, with monetary policy now in a tightening zone, we are closer to the point where it will be appropriate to hold rate hikes on hold to have more time to assess the economic situation,” Lowe said in a recent speech Data and Inflation.

“At what point a pause is appropriate will be determined by the data and our view of the outlook.”

After the speech, Lowe answered questions and said the board is ready to respond month-to-month and that if upcoming economic data speaks for a pause, he could do so at the next policy meeting on April 4.

The dovish message led markets to scale back the likely peak in interest rates to 4.10%, down from 4.35% a week ago.

It also came in stark contrast to the US Federal Reserve Chairman, who warned on Tuesday that interest rates there may need to rise faster and higher than expected to get inflation under control.

That divergence had already caused the Australian dollar to fall 2.2% overnight to a four-month low of $0.6580 as its US counterpart rallied across the board.

Asked about the divergence, Lowe said the outlook for inflation and wages in Australia is not as worrying as in the United States and markets should understand that.

Lowe said recently released data on Australian monthly consumer prices supported arguments that inflation had peaked while payrolls were lower than expected.

“These data suggest that the risk of a price-wages spiral remains low,” Lowe said.

The numbers also showed that household consumption had slowed significantly in the December quarter, bringing demand back into better balance with supply.

“The post-pandemic spending recovery is now largely over,” Lowe said.

“More fundamentally, the combination of pressure on the cost of living, higher interest rates and falling property values ​​is weighing on consumption.” – Reuters