The deputy governor of the reserve Bank of Australia has the decision of the board of directors to lower last month, despite warnings from its own staff that it would contribute to inflation that will remain high in the long term.
In his declaration of February on monetary policy, RBA economists predict the underlying inflation to stay above 2.5 percent inflation objective of the bank if it leaves the cash rate in accordance with market expectations.
Andrew Hauser denied claims that the long -awaited decision of the board in February to reduce the cash rate of 4.35 percent to 4.10 percent was a rejection of internal advice.
“Then why did the sign lower the rates?” He said on Wednesday in a speech to the Australian Financial Review Business Summit.
'Have we rejected the prognoses of the staff, as some claimed? Or have we suddenly and have relocating our aforementioned intolerance for persistent inflation deviations from Target relaxing?
“None of that kind – at least for me the reasoning is relatively easy.”
John Simon, a former head of research at the RBA and now a fellow at Macquarie University, was one voice that questioned the decision of the board.
'Between November and today, the expectations of the RBA are for a stronger inflation pressure. And they cut? “He was quoted as in the AF.
RBA -ADJUNCT -Governor Andrew Hauser (photo) denied the rate reduction in contradiction with earlier inflation trials of RBA employees
RBA -Governor Michele Bullock (Photo -Center)
“Perhaps there is a disagreement between the RBA staff, who prepare the predictions, and the RBA council, who make the decision.”
Mr. Hauser said that the prediction of persistent high inflation had been based three times on the RBA shredding three times in the coming 12 months, because the market had predicted, but the board had not intended to do that.
Since then, markets have withdrawn their tariff reduction expectations, deterred by a flood of ragged comments since the meeting, and now the price in just 60 basic points of extra relaxation.
Even that can still be a bit too ambitious.
“The rate reduction in February reduces the risks of inflation that distinguishes that center point, but the board does not currently share the trust of the market that a series of further cutbacks will be required,” said Mr. Hauser.
As he did in recent public commitments, Mr. Hauser repeated that the bank had no long -term plan for monetary policy, but would take decisions instead Meeting at the same time, based on the data available to them.
Speculators have revised their rate cut expectations and now expect to relax 60 basic points
“The interest rates will go where they have to go to maximize the opportunities to keep inflation sustainable in the target tire and at the same time support the entire employment,” he said.
“The progress to that goal has been good – but it is too early to explain the victory.”
Uncertainty about the tensions of global trade and the flow effects on economic growth would influence the decision -making of the administration, as well as the assessment of how tight the labor market is.
Mr Hauser acknowledged the views of 'serious commentators' that the RBA was too pessimistic about the inflation caused by the current low unemployment levels, which cause higher wages.
But in general the central projection remained that the labor market would remain relatively tight during the forecast period and a potential motivation of inflation.
