RBA’s Kent pays lip service to ‘further tightening may be required’ to slow inflation

The speech by Christopher Kent, Assistant Governor (Financial Markets) at the Reserve Bank of Australia is titled “Channels of Transmission’ (link to full text)

He doesn’t sound keen on further rate hikes. The headlines indicate a slew of reasons for further rate hikes not being required. And just the one line on ‘may’ need to do more thrown in just to not slam any doors is my take.

Headlines via Reuters:

  • Monetary policy is slowing the growth of demand, inflation
  • Policy lags mean
    some further effects of past rate hikes are still to be felt through the economy
  • Repeats that some further
    tightening of policy may be required to ensure inflation slows
  • The effect of slower
    demand growth on inflation is now building
  • Hearing in liaison
    that a range of retailers discounting in the face of weak consumer
  • Mortgage payments
    are at a record share of household disposable income, will rise further
  • The rise in interest
    rates has also increased incentives to save
  • Board is paying
    close attention to economic developments here and overseas

The background to this is that the Bank has paused its rate hike path for the past 3 meetings. On October 25 we get official quarterly CPI data. Monthly indications of inflation, and others (yesterday’s business survey, for example) have shown encouraging signs of diminishing inflation pressure and if the October 25 data release confirms then the Bank should remain on hold at its next meeting, on November 7. Until that data is in though the November meeting does remain ‘live’.

This article was written by Eamonn Sheridan at www.forexlive.com. Source