“The new RBA governor Philip Lowe says rate cuts could be needed to fight low inflation.” SMH 18/10/16
In his first speech since taking over from Glenn Stevens as governor in September, Dr Lowe said each of the bank’s two rate cuts this year were in response to lower than expected inflation.
The easing in policy was not in response to concerns about economic growth. If anything, the growth outcomes over the past year, as measured by real GDP or the trend in unemployment, have been a bit better than expected.
“The headline inflation rate is currently 1 per cent, well below the RBA’s medium-term target band of 2 to 3 per cent. Over the next two years, it should pick up, although to something “closer to 2 per cent than 3 per cent,” Dr Lowe said.
While the RBA would take account of the housing market in any decision it made about rates, the state of the market was mixed.
“Prices seem to be increasing quite briskly again in some areas, although are falling in others. Growth in rents is very low and there is a big increase in housing supply still to come,” Dr Lowe said.
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