Philip Lowe has just delivered his first speech as RBA governor, and one look through the text suggests that he’s in no rush to cut interest rates again.
However, just because he doesn’t appear rushed doesn’t mean that he won’t be prepared to cut rates again near-term, says Kristina Clifton, an economist at the Commonwealth Bank.
In particular, she notes that Lowe “emphasised low inflation expectations more than the previous Governor Stevens ever did”, hinting to her that next week’s Australian Q3 CPI remains important in terms of near-term policy deliberations at the RBA.
“In explaining the interest rate cuts in May and August this year, Lowe said that ‘we do need to guard against inflation expectations falling too far’, emphasising that ‘the easing in policy was not in response to concerns about economic growth’,” she said.
“Given the importance of actual inflation for inflation expectations, next week’s Q3 CPI will be an important update.”
To Clifton, a rate cut in November is still a possibility should the quarterly core CPI reading come in weak.
“In our view, an underlying CPI of 0.3% or lower will trigger a rate cut at the November meeting,” she says.
“Our sense is that the RBA do not want to cut rates but will if next week’s CPI is low enough”.
The ABS will release Australia’s Q3 CPI report on Wednesday, October 26.
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