Reserve Bank of Australia Governor Philip Lowe admits he made mistake

Reserve Bank Governor Philip Lowe has admitted he made a mistake suggesting interest rates would not rise until 2024.

The economist in charge of setting monetary policy repeatedly vowed in 2021 the cash rate would stay on hold at a record low of 0.1 per cent for another three years.

But Dr Lowe told the House of Representatives Economics Committee in Canberra it was a mistake to make ‘conditional’ remarks about interest rates last year, before Russia’s Ukraine invasion pushed up crude oil prices.

‘Some people think that was a mistake and it may well have been,’ he said on Friday morning.

Borrowers since May have copped five consecutive monthly interest rate increases, with the 2.25 percentage point rises equating to the most severe monetary policy tightening since 1994. 

The cash rate is now at a seven-year high of 2.35 per cent with Dr Lowe on Friday hinting at more interest rate rises with inflation forecast to hit a 32-year high in 2022.

ANZ is now hinting interest rates could keep rising in 2023, after previously expecting the cash rate to peak at a 10-year high of 3.35 per cent in December. 

Dr Lowe said in future, he would refrain from being specific with a date, even if he was talking about existing economic circumstances. 

‘Our language will be vaguer,’ he said. 

He was adamant his remarks had been interpreted as promises when they were comments based on current economic circumstances when inflation, for most of last year, had stayed within the Reserve Bank’s two to three per cent target. 

Treasurer Jim Chalmers in July launched a review into the Reserve Bank’s monetary policy decisions with a focus on its communications strategy.

Inflation in the year to June climbed by 6.1 per cent but the RBA and Treasury are now both expecting it to hit a fresh 32-year high of 7.75 per cent in 2022.