Australian central bank Governor Philip Lowe said the rate-setting board will move to eight meetings a year from 11 now, beginning in 2024, while reiterating that policy may need to be tightened further.
(Bloomberg) — Australian central bank Governor Philip Lowe said the rate-setting board will move to eight meetings a year from 11 now, beginning in 2024, while reiterating that policy may need to be tightened further.
Four of the Reserve Bank’s meetings will be on the first Tuesday of February, May, August and November, Lowe said in a speech in Brisbane on Wednesday.
The exact dates for the other four will be published “soon,” he added.
Decisions will be announced at 2.30 p.m. Sydney time as is the case currently. Among other changes decided by the board at its July meeting:
- Board meetings will be longer, typically starting on the Monday afternoon and continue on the Tuesday morning
- Governor to hold a media conference at 3:30 p.m.
after each one
- Quarterly economic forecasts to be published alongside rate decisions, instead of the following Friday as is currently the case
- Post-meeting statement announcing decision will be issued by the board, rather than the governor
The revamp follows an independent review of the RBA earlier this year that recommended wholesale changes to the central bank’s board structure and decision-making processes.
“Together, these changes are significant,” Lowe said.
“The less frequent and longer meetings will provide more time for the board to examine issues in detail and to have deeper discussions on monetary policy strategy, alternative policy options and risks, as well as on communication.”
The measures come after Treasurer Jim Chalmers said earlier Wednesday that he expects to make an announcement “soon” on whether Lowe will receive an extension or be replaced.
The governor’s seven-year term expires in mid-September.
Asked after the speech about his future, Lowe stuck to the formula he has used whenever the subject of reappointment has been raised. “If I was asked to continue in the role, I would be honored to do that,” he said.
“If I am not asked to continue in the role, I will do my best to support my successor.”
Lowe spoke a week after the RBA board left the cash rate unchanged at 4.1%, just its second pause in a 15-month tightening cycle, and signaled further hikes “may be required.” He reiterated that position in the address and expanded on it when asked whether he’s become more confident on the inflation outlook.
“Consumption growth is weak and that is largely because of what is going on with monetary policy,” he said.
“We’re confident what we’re doing is working. The question is how much more we need to do and we have a completely open mind on that.”
The RBA is assessing the impact of 4 percentage points of tightening since May 2022 and the governor highlighted today it was conscious of the lags involved in rate hikes flowing through the economy.
“Lowe’s speech was softer on the inflation and interest rate outlook, with a less explicit tightening bias,” said Diana Mousina, deputy chief economist at AMP Capital Markets.
“I wasn’t expecting the changes to the number of meetings to be announced so soon and it does seem to be lining up with a change of leadership in the RBA.”
The governor said the board will conduct a full review of its central forecasts and risks at its next meeting on Aug.
1 and assess “the many cross-currents affecting the inflation outlook.”
“On the one hand, there are ongoing pricing pressures from several factors,” he said, referring to high capacity utilization, strong growth in unit labor costs, rapid housing rent rises and higher electricity prices.
“But, on the other hand, there are several factors working in the other direction, contributing to the easing of inflation.”
“So, it is a complex picture and there are significant uncertainties regarding the outlook,” he said.
Economists surveyed by Bloomberg expect two more RBA rate hikes to 4.6% this year while market pricing implies at least one more increase in October.
Legislative Process
Returning to the changes, Lowe said other recommendations will be considered after the legislative process has been completed and the new Monetary Policy Board is up and running.
“This will avoid the current board locking the new board into a particular approach,” he said.
These include:
- Publication of an unattributed vote count
- Board members making regular public appearances to discuss their thinking and decisions on monetary policy
- Establishment of an expert advisory group to engage with the board
- Board papers being published with a five-year lag
Lowe highlighted that the current as well as new monetary policy boards recommended by the review are “unusual” by international standards given only two of nine board members are insiders.
Faraz Syed, an economist at Citigroup Inc., said Wednesday’s speech was the governor’s last chance for a “public audition” for an extension.
“We believe it’s unlikely that Governor Lowe gets an extension, and the more likely outcome is a replacement from outside the RBA, one which gives the government more confidence to execute the sweeping institutional and cultural changes recommended by the RBA Review.”
(Adds responses in Q&A and comments from economists.)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.
