RBA Set to Stand Pat Even as US Signals Rate Cuts, Hauser Says

Australian interest rates are likely to stay unchanged in the near future because inflation is “a bit stickier” than the in the US, Reserve Bank Deputy Governor Andrew Hauser said, highlighting a global divergence as the Federal Reserve prepares to ease policy.
“We are not yet as confident, as Jay is in the US, that inflation in Australia is back on a sustainable path back to target,” Hauser said in a podcast with The Conversation, referring to Fed Chair Jerome Powell. “Therefore we have to hold rates where they are for the time being.”
But, he added, “we will be as alert to the potential for changing rates and for easing rates.”
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The comments come about a week after Powell signaled at an annual conference in Jackson Hole, Wyoming, that the time has come for the Fed to cut its key policy rate. Hauser represented the RBA at that symposium.
Australia raised rates by less than counterparts during the 2022-23 tightening cycle to try to hang onto employment gains. The RBA took the cash rate to a 12-year-high of 4.35%, about 1 percentage point below the US.
“As a result, you wouldn’t necessarily expect them to come down quite as far or quite as quickly until we see inflation more sustainably moving back to target,” Hauser said of local rates. The RBA’s decision to hike by less than other central banks has drawn scrutiny as Australian consumer prices are taking longer to return to target. 
A partial gauge of Australian inflation last week showed that while price pressures are easing, it’s not fast enough to warrant early rate cuts.
Hauser said Powell’s signal that US rates will soon start falling doesn’t change the local policy outlook, though the RBA will factor in slowing global prices and rate reductions at other central banks in its decisions ahead. 
“We’re hopeful that in due course we would follow suit but we have to take into account the outlook for inflation in Australia and inflation is too high at the moment,” Hauser said.
“That is our focus.”
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