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Friday, 7 February 2020

Steady as she goes


Far too much to even contemplate writing about today, following the release of the Reserve Bank's SOMP and Governor Lowe's appearance at the House of Reps. 

There were some intriguing moments, including Andrew Leigh skewering the Governor with a Debelle quote criticising the notion of leaning against the wind.

The short version is that although the economy is running below potential and inflation isn't likely to hit the target any time soon, interest rates will be left on hold unless there's material evidence that the unemployment rate is trending higher.

Lowe acknowledged the undershoot but said that the target was 'medium term macro stability', and that hopefully people would think of inflation as tracking at around 'two point something' (though it's not - it's been one point something for years). 

It's a tricky balance to be struck, but Lowe noted that interest rates are presently a driving factor for the housing market, especially in Sydney and Melbourne, and therefore there's a reluctance to cut further unless it becomes necessary. 

Source: RBA

You could argue that the cue should've been taken from weak inflation sooner, but those questions and answers all lie back in time now.

Looking forward, the RBA will monitor the disruptive impacts of the drought, bushfires, and the coronavirus, and observe the countering impacts of government stimulus payments and the rebuild. 

Interest rates will be low for a long time, and if unemployment rises materially they will be cut further. 

Much more than this was discussed,'s Friday.

Have a great weekend!


UK housing prices were up +4.1 per cent over the year to January 2020.

Transactions are now rising again, according to the Halifax, as a level of confidence returns following the Brexit disruptions.