RBA Governor Phil Lowe yesterday gave an address to the Australian Business Economists (ABE) where he threw a wet blanket over market predictions that the cash rate will soon rise next year.
Lowe first noted that inflation has undershot forecasts globally over the past decade, but is now on the rise; albeit appears temporary:
The recent concerns about inflation have come after many years of inflation being below central banks’ targets. This first graph shows the gap between the average inflation rate over the 10 years to the end of 2019 and the target rate (Graph 1). The picture is pretty clear: the undershooting of inflation targets has been a common, though not universal, experience. The reasons for this are complex but include increasing globalisation, advances in technology and changes in the way labour markets work.
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Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
