RBA Governor Philip Lowe has defended the central bank during a Senate estimates hearing in Canberra. (The Sydney Morning Herald”
RBA Although Governor Philip Lowe acknowledged that the central bank’s nine straight interest rate increases were “unpopular,” he maintained their necessity for containing inflation.
Lowe testified that the RBA board and he were both aware of the present cost-of-living crisis during a 90-minute Senate estimates hearing.
We understand how challenging it might be to have a mortgage while the interest rate has increased, the man stated.
I currently receive a lot of letters from people telling me about their individual situations, and I completely understand how difficult they are.
When questioned about the criticism he had received during his time as RBA governor, Lowe responded that it wasn’t “just him” making financial decisions and that the criticism as a whole was “a bit harsh.”
Inflation management, ensuring that inflation expectations do not change, and avoiding all those bad things are the responsibilities of the central bank, according to Lowe.
“The Reserve Bank board is responsible for that. Not just me, either.
“I sometimes notice that everything is sheeted down to me, which is unjust because the board is responsible.
“These decisions are made by nine of us, including (deputy governor) Michele (Bullock).”
In spite of this, he insisted that the bank will take all necessary steps to keep inflation under control.
“I don’t think it’s my fault, though. That’s what we do. I must control inflation. I have to persuade the neighborhood that we are serious about that,” he said.
“That’s our responsibility, and I accept that it’s unpopular.
The central bank is hence separate from its function in the decision-making process.
“It’s simpler for me to take unconventional actions than it could be for you. I’m not grumbling.
When questioned about potential rate increases, Lowe said the board was “open-minded,” but he cautioned that it was probable there would be additional increases in the future.
“We are open-minded… I don’t think we’ve reached the top yet, but I’m not sure how much further to climb,” he remarked.
It will depend on information on inflation, consumer resilience, expenditure, and wage trends.
“I don’t think we’ve reached the pinnacle yet, but we’re still not sure how far they need to go,”
In response to questions, Lowe described how persistently high inflation was “damaging” for the economy, even raising the possibility that the RBA had not raised rates sufficiently thus far.
There is a chance that spending will be more resilient and that inflation would remain high, he said, adding that we have not yet done enough to control interest rates.
“A high level of inflation is tremendously harmful to the economy.
It makes income inequality worse. It makes planning for enterprises more difficult.
The value of people’s savings is depreciated. The economy will suffer because of it.
Nine interest rate increases in a row have clashed with rising inflation in recent months, placing Lowe and the RBA board under constant pressure.
When interest rates were reduced to the 0.1% emergency level during the height of the pandemic, Lowe and the board were charged with deceiving borrowers by predicting that monetary policy might not change until 2024.
Despite the pressure, Lowe insisted that he had no plans to resign early.
“I have a seven-year tenure as the bank’s governor, and I plan to complete it.
Although this is a necessary step in the process and it is a significant position, he insisted that he intended to complete the term.
“I go back to the argument I mentioned, namely that a board of nine people makes decisions for the Reserve Bank. Not only me.
September will mark the end of Lowe’s term.
