RBA governor Philip Lowe says the decision to keep the cash rate on hold at 4.1 per cent for the last two months was to provide time to assess the effect of the 12 interest rate rises already delivered.
“The board is mindful that interest rates have been increased by a large amount in a short period of time and that there are lags in the operation of policy,” he says. “Monetary policy is in restrictive territory and it is working to establish a better balance between supply and demand in the economy. Given this, and the uncertainties surrounding the outlook, the Board judged that the right thing to do for now was to sit and assess.”
Lowe says it’s “encouraging” that recent data are consistent with inflation falling back to the RBA’s 2 to 3 per cent inflation target. “The data are also consistent with the Australian economy continuing to travel along that narrow path that I have spoken about for some time – that path is one that leads to inflation coming down within a reasonable timeframe and the unemployment rate remaining below the levels of the past 40 years.”