SYDNEY — The Reserve Bank of Australia will do “what is necessary” to keep inflation within its target of 2%-3% over time, Gov. Philip Lowe said, in a sign that some hawkishness might be creeping into the central bank’s narrative on interest rates.
However, in a speech to the National Press Club on Wednesday, Lowe offered no hint that an interest rate rise was imminent. He said that the RBA had time to sift trends in supply and demand in the economy, while waiting for stronger wages growth.
“I want to make it clear that the RBA is committed to achieving the (2%-3%) inflation target, which remains at the center of our monetary policy framework. We don’t want to see inflation too low or too high,” he said.
“We will do what is necessary to maintain low and stable inflation, which is important not only in its own right but also as a precondition for a sustained period of full employment,” he said.
The comments come after data showed inflation surged in the fourth quarter of 2021, while unemployment fell sharply in December.
Financial markets have been betting the RBA will raise interest rates by June, but Mr. Lowe’s comments suggest the wait will be longer than that.
Lowe conceded that the bank’s goals of full employment, and low and sustained inflation, were closer to being achieved than the RBA had expected in late 2021.
“The year ahead will no doubt have its challenges and its surprises. But standing here in early February, we are closer to full employment and achieving the inflation target than we had anticipated,” he said.