Reserve Bank of Australia Deputy Governor Michele Bullock speech
Summary Headlines via Reuters:
- Employment, economy need to grow below trend for a while
- Economy would be
closer to sustainable balance point with unemployment at 4.5% - Australia is at or
even above estimates of full employment for the first time in decades - Employment is above
what we would consider to be consistent with our inflation target - Have been willing to
accept more gradual return of inflation to target than many other
central banks - But entrenched
inflation would lead to higher rates, deep recession and more
unemployment - Labour market
conditions will invariably soften as inflation is contained - Balance between
labour demand and supply has improved somewhat recently - Nevertheless, the
labour market remains tight by most measures
—
These comments seem strongly suggestive of a rate hike coming at the July 4 RBA meeting.
The jobless rate is currently 3.55% and Bullock nominates a percentage point higher as ‘full employment’. This opens the door for further rate hike(s). Also says:
- entrenched inflation would lead to higher rates, deep recession and more unemployment
The subtext is that the unemployment rate must rise in order to restrain inflation. This removes a barrier to a rate hike in July, the bank is comfortable with higher unemployment from here. Rightly or wrongly. There is a rate hike coming on July 4 folks!
Earlier in the session from Australia’s central bank:
This article was written by Eamonn Sheridan at www.forexlive.com. Source