There is not a strong case for a near-term adjustment in monetary policy given the continuing spare capacity in the economy and the subdued outlook for inflation, Reserve Bank of Australia's Governor Philip Lowe said Tuesday.
The governor observed that a continuation of accommodative monetary policy is appropriate.
"If the economy continues to improve as expected, it is more likely that the next move in interest rates will be up, rather than down," Lowe said at the Australian Business Economists' annual dinner.
Lowe observed that consumption remained subdued due to the combination of weak growth in real household income and the high level of household debt.
The bank expects inflation to move above 2 percent on a sustained basis, but it is taking a bit longer to get there than earlier expected, Lowe noted.
Over the past year or so there has been progress in moving the economy closer to full employment and in having inflation return to the 2 to 3 percent range. Both of these are positive developments and suggest a more familiar normal is still in sight, he added.
by RTT Staff Writer
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