RBA Governor Philip Lowe appeared before the House of Representatives Standing Committee on Economics today. He reiterated the three points in communications about monetary policy. Firstly, employment and inflation are “moving in the right direction”. Secondly, the next move is interest rates is “to be up”. Thirdly, progresses is expected to be “gradual” and there is “not a strong case for near term adjustment in interest rates.
Lowe also highlighted a few global risks. Firstly, in some countries, businesses are delaying investment due to rising trade tensions. If it become a “more general story”, it’s the channel through which trade tensions would “sap the current positive momentum” in the global economy.
Secondly, it’s “highly unusual” for the US to have “sizeable fiscal stimulus” at a time of “limited capacity”. Growth could “surprise on the upside. And Lowe is “less relaxed” than others on the implications on inflation. He warned that Fed could have to withdraw monetary accommodation “more quickly than currently projected”with possibly disruptive consequences in financial markets.
A third set of global risks are from individual economies with “country-specific structural and/or institutional vulnerabilities”, including Argentina, Brazil, Italy and Turkey.
His full opening remarks here.
