In a speech delivered today, RBA Governor Philip Lowe reiterated the dovish stance that, “the Board is prepared to provide additional support by easing monetary policy further.” At the same time, “whether or not further monetary easing is needed, it is reasonable to expect an extended period of low interest rates.”
Lowe also noted, “on current projections, it will be some time before inflation is comfortably back within the target range”. And, it’s “highly unlikely that we will be contemplating higher interest rates until we are confident that inflation will return to around the midpoint of the target range.”
He also defended current inflation target a said it has “stood the test of time”. He warned that lowering the target could “hardly seems a good way to build long-term credibility”. ” Lowe said. “Shifting the goal posts could also entrench a low inflation mindset.” Thus, “this brings me back to the question: is inflation targeting still appropriate? The short answer is yes.” And, ” the evidence does not support the idea that a change to our inflation target would deliver better economic outcomes than achieved by our current flexible inflation target,” he noted.
