Outgoing Reserve Bank of Australia (RBA) governor, Philip Lowe, has recently confirmed that a “modest” rise in joblessness is necessary to bring inflation down to the target rate. Lowe, who will step down from his position in September, made this statement during a parliamentary hearing. His deputy, Michele Bullock, had previously mentioned that the unemployment rate would need to reach 4.5 percent before the desired inflation rate is achieved.
Lowe reiterated this viewpoint and stated that unpopular measures would be taken, emphasizing that such actions were necessary and hoping for the understanding of the community. According to Lowe, the RBA’s efforts to curb inflation were assisted by the resolution of global supply issues and a decline in oil prices. However, for the next phase, he believes that a slight increase in unemployment is required.
The RBA predicts that inflation will return to the target rate of two to three percent by 2025. Lowe explained that attempting to reach this target earlier would have resulted in a higher level of joblessness, which would not be in the national interest. Additionally, to achieve the target by 2024, interest rates would need to rise by approximately one percentage point.
Lowe acknowledged the challenging circumstances faced by many individuals over the past year but asserted that things were beginning to improve. He mentioned that the worst is over and expressed confidence in returning inflation to the target rate along with a stronger labor market compared to pre-pandemic times.
Q: What did Philip Lowe confirm regarding inflation control?
A: Philip Lowe confirmed that a “modest” rise in joblessness is necessary to bring inflation down to the desired target rate.
Q: Why did Lowe claim that an earlier target date for inflation would lead to increasing joblessness?
A: According to Lowe, an earlier target date for inflation would result in higher joblessness, which is not in the national interest.
Q: What is the RBA’s prediction for inflation?
A: The RBA predicts that inflation will return to the target rate of two to three percent by 2025.