Westpac's Chief Economist Bill Evans has written his response to the Reserve Bank of Australia minutes & Governor Lowe's speech today
He concludes (bolding is mine):
- The minutes and today's speech have provided us with valuable insights into the core approach to policy that we can expect from the new Governor.
- Less emphasis on specific inflation targeting and direct consideration of the implications of policy for housing and labour markets is clearly spelled out.
- However, the minutes do remind us that inflation is still the central policy objective and the inflation reports which we receive on a quarterly basis will always be important to the policy response.
Westpac's outlook for the RBA:
- Based on the Governor's apparent uncertainty around housing and the labour market at the moment it is clear that he would not welcome a sharp negative surprise on current inflation.
- We do not think that such an outcome is at all likely and we also believe that his tolerance for a very low number will be high but not infinite.
- We maintain our long held view that rates will remain on hold in November and developments in the real economy will be sufficiently supportive to keep rates on hold in 2017.
