RBA Governor “sorry” over interest rate comments
The RBA governor – Philip Lowe – has indicated that he is ‘sorry’ for his November 2021 indication that interest rates would not rise until 2024. However, this was a classic non-apology. For example, he noted:
“I’m sorry that people listened to what we said and then acted on that and now find themselves in a position they don’t want to be in,”
“I’m sorry if people listened to what we’d said and acted on what we’d said and now regret what they’ve done. I’m sorry that happened,”
He also has doubled-down on his assertion that the RBA had caveated its statements but that people did not hear, or ignored, those caveats:
“Looking back, we would have chosen different language. People did not hear the caveats. I thought it was clear … but the community didn’t think it was clear.
The issue is symptomatic of several problems, however:
- The RBA might have caveated its statements, but it should have known that non-experts would not fully interpret and appreciate these caveats. The RBA should probably consider its register when communicating.
- The RBA has implicitly indicated that people should not rely on the RBA’s statements. This is troubling: Central banks would ideally want more credibility, not less. The RBA will make it more difficult to signal policy intentions if it suggests that people should not rely on them.
- The RBA should address precisely why its analysis was wrong in 2021. Many economists had warned of significant inflation. This was especially the case by the end of 2021, when supply chain factors were especially pointed. The RBA could gain from considering more credible private sector analysis.