The subtlety of language is a big thing for central bankers and the hordes of economists who hang on their every word. The key change in language from the RBA today was “further tightening”. They replaced “further increases in interest rates” with “further tightening”. What’s the scam?
The scam is that there are other tools at the Bank’s disposal to contain inflation besides the big one, lifting the cash rate. The subtle change suggests a more sophisticated attack on inflation.
It might mean the RBA could sell part of their bond portfolio, as banks start to repay the Term Funding Facility (a Covid liquidity measure from which they are profiting hugely) and Commonwealth bonds mature. This would remove “liquidity” from the system by making borrowing harder.
The whole central banking world is watching Governor Philip Lowe’s moves. Inflation hit its highest level in 32 years – 7.8 per cent in the December quarter.
For 10th time #RBA raises #CashRate target
5th time +0.25%: to 3.60% 📈Also: interest on commercial banks' Exchange Settlement balances w RBA 📈 by +0.25% to 3.50%
🗣️"The Board expects further tightening of monetary policy will be needed to ensure inflation returns to target" pic.twitter.com/RL1oZE4YCt
— 13foot7 (@13foot7) March 7, 2023
Michael West established Michael West Media in 2016 to focus on journalism of high public interest, particularly the rising power of corporations over democracy. West was formerly a journalist and editor with Fairfax newspapers, a columnist for News Corp and even, once, a stockbroker.