Increasing rates too soon could threaten unemployment target: RBA governor

Reserve Bank governor Philip Lowe has warned moving too early on interest rates will put historic low unemployment levels at risk, but if prices and wages rise quickly there will be a stronger case for rises.

“Over the period ahead we have the opportunity to secure a lower rate of unemployment than was thought possible just a short while ago,” he said. “Moving too early could put this at risk.” Dr Lowe said the RBA was still committed to maintaining “low and stable inflation” and will do what is necessary to achieve this goal. The central bank has an underlying inflation target of 2 per cent to 3 per cent.

However, he raised the uncertain outlook of COVID-19 outbreaks and quick changes in financial conditions globally as among the potential factors derailing the bank’s ability to sit tight.

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