Reserve Bank of Australia Governor Philip Lowe said the bank is prepared to remain patient before it raises its key interest rate as policymakers monitor the evolution of various factors affecting inflation.
The board will not increase the cash rate until inflation is sustainably within the 2 to 3 percent range and it is too early to conclude that inflation is sustainably in the target range, Lowe said at the National Press Club of Australia on Wednesday.
“We will also be looking for further evidence that labour costs are growing at a rate consistent with inflation being sustained within the target range,” he said. “We expect this evidence to emerge over time, but it is unlikely to do so quickly.”
The unemployment rate is forecast to fall to around 3.75 percent by the end of this year and be sustained at around this rate during 2023.
In terms of underlying inflation, the midpoint of the target range has been reached for the first time in over seven years, Lowe said. This comes on the back of very significant disruptions in supply chains and distribution networks, which would be expected to be resolved over the months ahead.
But standing here in early February, the governor said the economy is closer to full employment and achieving the inflation than had anticipated earlier.
On Tuesday, the RBA had decided to discontinue its bond purchase programme and kept its cash rate unchanged at a record low of 0.10 percent. But the governor said ceasing purchases under the bond purchase program does not imply a near-term increase in interest rates.
The RBA is set to release a full set of updated economic forecasts on Friday in the quarterly Statement on Monetary Policy.
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