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- Australian inflation to reach target level in mid-2025
- The bank paused this month so it could “re-examine” the situation in August
- COVID-era inflation still looms as a danger to the nation’s economy and the RBA will rise again if required
Australia must ensure that COVID-era inflation remains “temporary”, the Reserve Bank of Australia (RBA) Governor Philip Lowe said today – a comment he prefaced by stating inflation is here to stay until 2025.
“If high inflation were to become entrenched in people’s expectations, it would be very costly to reduce later, involving even higher interest rates and a larger rise in unemployment,” Lowe told attendees at the Australian Conference for Economists today.
“The Board is resolute in its determination to return inflation to target within a reasonable timeframe and will do what is necessary.”
The RBA also announced a change in its meeting schedule, transitioning from 11 meetings to eight meetings per year, similar to the model used by the US Federal Reserve. Each Australian conference will be accompanied by a mandatory press release.
Crucially, Lowe mentioned today that inflation is projected to reach the “top of the target band” (3 per cent) by mid-2025.
“It is a complex picture and there are significant uncertainties … the Board decided that … it was appropriate to hold interest rates steady this month and re-examine the situation next month,” Lowe said.
Treasurer to decide if RBA boss keeps his job
Lowe’s speech comes at a time when his very job is on the line, given it’s up for review in September.
He has faced controversy and criticism from various sectors of the Australian community in recent years.
At the beginning of the pandemic, he frequently reassured the public that interest rate hikes were far off and that mortgage holders were safe. However, less than two years later, interest rates were rising too quickly for many to handle.
A particularly strong recommendation in a recent review from Canberra proposed stripping the bank of its ability to raise interest rates.
The recommendations were made in an effort to keep pace with how other central banks across the globe operate.
