Investing.com - Reserve Bank of Australia Governor Philip Lowe said Tuesday third quarter inflation figures will be an important indication of inflation expectations, which have clearly declined recently and there is a need to guard against them falling further.
"Of course, one of the key influences on inflation expectations is the actual outcomes for inflation. We will get an important update next week with the release of the September quarter CPI," Lowe said at a conference in Sydney. CPI data is due Oct. 26.
The RBA lowered the cash rate in May and August, now at a record low 1.5%, in response to lower-than-expected inflation outcomes early in the year and an assessment that inflation was likely to remain quite low for some time, Lowe said.
"The easing in policy wasn't in response to concerns about economic growth. If anything, the growth outcomes over the past year, as measured by real GDP or the trend in unemployment, have been a bit better than expected," Lowe said.
In deciding how much variation in inflation is acceptable the RBA gives prominence to employment and stability of the financial system, Lowe said.
"Achieving the quickest return of inflation back to 2.5% would be unlikely to be in the public interest if it came at the cost of a weakening of balance sheets and an unsustainable build up of leverage in response to historically low interest rates.
"Conversely, the case for moving more quickly would be strengthened in a world where the labor market was deteriorating and people were having increasing difficulty finding jobs," he said.