(Bloomberg) — Reserve Bank of Australia No. 2 Andrew Hauser said it would be a “serious mistake” to make policy in response to a single inflation report, noting there was still a raft of economic data to be released that would need detailed analysis.
Bloomberg’s Most Read
“We have a lot to reflect on before the August meeting,” RBA deputy governor Hauser said in response to a question in Sydney on Thursday. “It would be a serious mistake to establish policies based on a number and we have no intention of doing so.”
The Australian dollar weakened after Hauser’s remarks, while Australian bonds rose for the first time in three days when markets opened on Friday. Still, traders are pricing in a higher probability than that of an interest rate hike this year. There is little prospect of a cut until the end of 2025.
Fears that the RBA could resume monetary policy tightening at its meeting on August 5-6 gained momentum after a partial consumer price gauge released this week showed inflation accelerated to 4% in May, well above the central bank’s 2-3% target.
“The number we talked about a little bit earlier is only partial and it’s something I’m not used to in the U.K.,” Hauser said, referring to the monthly consumer price indicator. “There’s a whole range of data that will be released between now and when we meet in August.”
Hauser, a former Bank of England official, cited upcoming reports on employment, retail sales, business surveys and a full view of consumer prices in the second-quarter inflation report due July 31.
“RBA deputy governor Hauser’s comments last night took some of the heat off the move this week, but fragility remains,” said Martin Whetton, head of markets strategy at Westpac Banking Corp. in Sydney, referring to the overnight index swaps and the bond curve. “Inflation expectations from Q2 data will be important as they are shaping up to be one of the most important numbers,” he wrote in a note to clients.
While the central bank has raised rates to a 12-year high of 4.35%, it has acted more cautiously than many international counterparts. That raised questions about whether it has more to do with rates, especially when officials say they are not ruling out anything inside or outside policy. The RBA also said the board discussed an increase at each of its last two meetings.
Australia is struggling with the so-called last mile of inflation. Hauser, who was asked earlier about the persistence of utility prices, said monetary policy may be taking longer to fuel the economy, adding that a strong labor market may also be a factor.
The deputy governor is a member of the RBA’s rate-setting board. He made the remarks at a Citigroup Inc. event.
–With assistance from Matthew Burgess.
(Add the market reaction in the third paragraph and the analyst’s comment in the seventh.)
Most read from Bloomberg Businessweek
©2024 Bloomberg LP
