RBA Governor Philip Lowe reiterated in a speech that “further increases in interest rates will be required over the months ahead”. But policy is “not on a pre-sent path” due to uncertainties. Also, “all else equal, the case for a slower pace of increase in interest rates becomes stronger as the level of the cash rate rises.”
Lowe also highlighted three sources of uncertainty to the economy. The first is the “global economic environment”, including the US, Europe and China. He said, “some slowing in the global economy will help bring inflation down, but a sharp slowing would make the job of delivering a soft landing here in Australia much harder.”
The second source is “how inflation expectations and the inflation psychology in Australia adjust to the period of high inflation”. The third is “how households respond to higher interest rates”.
