Commentary
Reserve Bank of Australia (RBA) governor, Philip Lowe, has fired a warning shot over the bow of the federal treasurer by raising official interest rates another quarter of a percent this week to 3.85 percent.
The hard work on inflation has to be done by the government which has access to a large number of tools—fiscal and regulatory—to make it go away, while the governor really only has one blunt instrument—monetary policy.
While “the markets” were surprised at the rise, they shouldn’t have been. The surprise was that Lowe sat on his hands at the last RBA meeting just before Easter and left rates alone….