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Reserve Bank governor Philip Lowe says rate cuts could be needed to fight low inflation
Topic Started: 18 Oct 2016, 09:42 AM (2,022 Views)
Rufus
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Reserve Bank governor Philip Lowe says rate cuts could be needed to fight low inflation
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New Reserve Bank governor Philip Lowe has held out hope of further interest rate cuts, saying he needs to guard against inflation expectations falling too far.
In his first speech since taking over from Glenn Stevens as governor in September, Dr Lowe said each of the bank's two rate cuts this year were in response to lower than expected inflation.

Philip Lowe noted that he is the first governor to have taken office "where the concern of the day is more that inflation might turn out to be a bit too low rather than a bit too high". 

"The easing in policy was not in response to concerns about economic growth," he said. "If anything, the growth outcomes over the past year, as measured by real GDP or the trend in unemployment, have been a bit better than expected."
The headline inflation rate is currently 1 per cent, well below the RBA's medium-term target band of 2 to 3 per cent. Over the next two years, it should pick up, although to something "closer to 2 per cent than 3 per cent".

But if it turned down and expectations turned down, there would be a case for cutting rates to bring them back up.

"I am the first governor to have taken office where the concern of the day is more that inflation might turn out to be a bit too low rather than a bit too high," he told the Citi fund managers conference on Tuesday morning.
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herbie
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Yep, read between tha lines, tha dude would like the exchange rate ta be lower thanks very much.
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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Rufus
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herbie
18 Oct 2016, 11:23 AM
Yep, read between tha lines, tha dude would like the exchange rate ta be lower thanks very much.
bingo
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zaph
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Rufus
18 Oct 2016, 12:25 PM
bingo
Legs eleven!

Inflation IS dangerously low however.
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conork
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zaph
18 Oct 2016, 12:39 PM
Inflation IS dangerously low however.
For debtors?

Happy days for creditors.
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Ex BP Golly
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conork
18 Oct 2016, 08:42 PM
For debtors?

Happy days for creditors.
If you can't see beyond the interest rate, I'm sure you'd be very happy

Probably even load up on debt lol.
Edited by Ex BP Golly, 19 Oct 2016, 07:51 AM.
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Jon Snow
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Rufus
18 Oct 2016, 09:42 AM
The headline inflation rate is currently 1 per cent, well below the RBA's medium-term target band of 2 to 3 per cent. Over the next two years, it should pick up, although to something "closer to 2 per cent than 3 per cent".
No turnip, after 1% it goes to 0%. And after that, it goes to -1%. See if you can do a straight line extrapolation for the next number....
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But if it turned down and expectations turned down, there would be a case for cutting rates to bring them back up.

No turnip, if you cut rates again, inflation will go lower.
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"I am the first governor to have taken office where the concern of the day is more that inflation might turn out to be a bit too low rather than a bit too high," he told the Citi fund managers conference on Tuesday morning.
Somebody had to be left holding the deflation bag Phil. But don't feel too bad, governors and presidents of central banks with 15-20 times the firepower of you have failed at this game already. Inflation is dead.
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Khaderbhai
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Jon Snow
18 Oct 2016, 09:54 PM
No turnip, after 1% it goes to 0%. And after that, it goes to -1%. See if you can do a straight line extrapolation for the next number....

No turnip, if you cut rates again, inflation will go lower.
OK, so you're predicting deflation of at least 2% per annum. And rate cuts cause deflation now, is that it?

Where did you 'learn' this... ZeroHedge or Macrobusiness?
Banks can't repossess your home simply because the market value falls. Australia's Consumer Credit Code says consumers aren't liable for things ordinarily outside their control and can't be held to obligations that could only be met by selling their home. Click for details.

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Jon Snow
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Khaderbhai
18 Oct 2016, 10:11 PM
OK, so you're predicting deflation of at least 2% per annum.
Eventually. But before we get to 2% deflation, there is a 95% chance of a one-off drop in asset prices of around 30-40%.
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And rate cuts cause deflation now, is that it?
Yes, it's all rather complicated. Think about inputs to the production of goods and services. You've got materials, labour, energy and capital. As capital gets cheaper, your input costs go down. But what about those who have accumulated capital and now lend it out? As capital gets cheaper, their income declines. But what if they invest in equity? As equity prices rise, the cost of capital declines.
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Where did you 'learn' this... ZeroHedge or Macrobusiness?
Neither. But please, by all means continue with your blind faith in the high priests of banking, whose incantations seem to soothe your soul.
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Khaderbhai
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Jon Snow
18 Oct 2016, 10:49 PM
Eventually. But before we get to 2% deflation, there is a 95% chance of a one-off drop in asset prices of around 30-40%.

Yes, it's all rather complicated. Think about inputs to the production of goods and services. You've got materials, labour, energy and capital. As capital gets cheaper, your input costs go down. But what about those who have accumulated capital and now lend it out? As capital gets cheaper, their income declines. But what if they invest in equity? As equity prices rise, the cost of capital declines.
OK, good luck with all that.
Banks can't repossess your home simply because the market value falls. Australia's Consumer Credit Code says consumers aren't liable for things ordinarily outside their control and can't be held to obligations that could only be met by selling their home. Click for details.

"The truth is that there are no good men, or bad men. It is the deeds that have goodness or badness in them. There are good deeds, and bad deeds. Men are just men."
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