Reserve Bank of Australia’s Governor Glenn Stevens’ speech today was vital, with focus on inflation. Stevens repeated that the central bank continues to be quite committed to the inflation target of 2%-3%. He noted that this framework has been doing well since it was set up in early 1990’s.
Meanwhile, he also indicated towards the central bank’s flexibility around the target. Inflation expectations’ significance was emphasized. Stevens said that “businesses should be thinking of inflation as two-point-something”.
The governor stated that monetary policy was not much strong and that the effect was taking time to come through. He said that the economic growth is accelerating well, while unemployment is slightly better. However, Stevens noted that inflation is quite low.
Meanwhile, the governor again did not set a downside target for the AUD; however, he stated that the adjusting taking place is totally appropriate. This ‘pass’ does not seem to be a considerable signpost or a barrier to additional weakness of the AUD, said ANZ in a research report.
“We continue to expect further monetary policy easing given the low inflation outlook, and look for another 25bp cut in the cash rate to 1.5% at the August meeting”, added ANZ.
