Reserve Bank governor Philip Lowe signals there will be a trade-off between bringing down inflation and the nation’s unemployment rate.Credit:Bloomberg
On Tuesday,the RBA took the official cash rate to an 11-year high of 4.1 per cent. It did not rule out further interest rate rises.
The bank is in the middle of the most aggressive tightening of monetary policy since the late 1980s with growing concerns its efforts to bring inflation to heel will lead to a recession. National accounts figures on Wednesday are expected to confirm a slowdown in economic activity through the first three months of the year.
Lowe told the Morgan Stanley Australia conference that Tuesday’s move was to ensure inflation came down in a timely manner.
Loading
He said one of the “unsung” achievements of the bank’s ultra-low interest rates,and government stimulus,throughout the COVID pandemic was the sharp fall in unemployment that has recently inched up to 3.7 per cent.
Lowe signalled that while low unemployment was a major success,the bank was heavily focused on bringing inflation down to its target range.
“I want to make it clear,though,that the desire to preserve the gains in the labour market does not mean that the board will tolerate higher inflation persisting,” he said.