Speaking in Sydney yesterday, RBA governor Philip Lowe said Australian monetary policy is unlikely to move “in lockstep” with central bank activity overseas.
Mr Lowe’s comments came as the Australian Bureau of Statistics released its consumer price index (CPI) data for the June quarter, which came in under market expectations.
The 12-month CPI figure rose 1.9 per cent in the June 2017 quarter, down from 2.1 per cent in the March quarter.
The consequence of yesterday’s data release is that official inflation is now below the RBA’s target band of 2-3 per cent.
However, Mr Lowe, who tends to pay more attention to underlying inflation, remained confident inflation was heading upwards.
“Our central scenario remains for underlying inflation to pick up gradually as the economy strengthens,” he said.
“We have not sought to stimulate a rapid lift in inflation. The fact that the labour market has been generating sufficient jobs to keep the unemployment rate broadly steady has allowed us to be patient.
“Our judgement has been that seeking a more rapid pick-up in inflation through yet further monetary stimulus was likely to add to the medium-term risks.”
While the US Federal Reserve has started hiking interest rates and the ECB is considering pulling the plug on QE, those decisions have “no automatic implications for monetary policy in Australia”, he said.
“These central banks lowered their interest rates to zero and also expanded their balance sheets greatly. We did not go down this route,” Mr Lowe said.
“Just as we did not move in lockstep with other central banks when the monetary stimulus was being delivered, we don’t need to move in lockstep as some of this stimulus is removed.”
