Australia’s central bank welcomes Q2 inflation data, deputy governor says

[SYDNEY] Australia’s second-quarter inflation data was very welcomed and came in as just the central bank expected, a top official said on Thursday, but added the bank remained cautious about the interest rate outlook.

At the Barrenjoey Economic Forum in Sydney, Reserve Bank of Australia Deputy Governor Andrew Hauser reiterated the central bank’s gradual and measured approach to lowering interest rates.

“The data yesterday were very welcome,” said Hauser. “I know other people use words outstanding, superb and so forth. I’ll say very welcome.”

“To some extent, what we are going to tell you is look we are uncertain. We are feeling our way. It’s a board decision, not an individual decision.”

Data showed on Wednesday that consumer prices grew at the slowest pace in over four years in the June quarter, while core inflation hit a fresh three-year low and cemented market wagers for a cut in interest rates next month.

The RBA stunned markets earlier this month by holding interest rates steady at 3.85 per cent, saying the majority of the board members wanted to wait for more information that inflation was slowing as desired.

Markets are now pricing in a 95 per cent probability that the RBA will reduce rates by a quarter point on Aug 12, after the inflation data surprised on the low side and the jobless rate unexpectedly jumped to 4.3 per cent in June.

Hauser said unemployment is still low, with the labour market still close to full employment. If the jobless rate rises sharply, the central bank would have to react but that was not the central case, he added.

When asked about the central bank’s increased tendency to surprise markets, Hauser said being unpredictable would not be a norm.

“There will be shocks from time to time… you will see a whole sequence of us hopefully doing the right thing but the unpredictable thing.” REUTERS