RBA’s Lowe: Further rate rises will be required but not on a pre-set path

Further rate rises will be required but not on a pre-set path.

Conscious of lags in operation of monetary policy and that rates have risen very quickly.

Case for slower pace of rate hikes becomes stronger as the level of the cash rate rises.

But how high rates need to go and how quickly will be guided by data, outlook for inflation and labor market.

Price stability necessary for a strong economy, sustained full employment.

Sharp global slowdown would make it harder to achieve soft landing in Australia.

Recent data continue to suggest resilience in Australian consumer spending.

Inflation expectations remain consistent with the inflation target.

A shift higher in inflation expectations will require higher interest rates.

In our national interest, we avoid this shift.

Aggregate growth in wages has not yet responded materially to higher inflation.

Flexible inflation targeting has served Australia well, and remains best monetary policy regime.

Do not see a strong case for a move away from this broad approach.

Worth examining arguments for and against a change to the 2-3% target range.

Important we learn from our forecast mistakes on inflation.