27 May 2009

The Reserve Bank Assistant Governor

Philip Lowe said yesterday that it was appropriate to return to more normal monetary policy settings, given that uncertainty from the global financial crisis had eased. These comments echoed that of the Governor last week.

Lowe stressed that Australia’s economic prospects are more closely aligned with Asia’s – led by China – “than has been the case ever before.” Lowe also predicted higher current account deficits over the coming years as foreign investment in Australia rises. Lowe refused to comment on the AUD and said that he is starting to see inflation come down.

Financial markets are pricing in 2½ rate hikes of 25bp by the end of the year or attaching around 265% to tightening of 75bp by the end of the year.

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