Interest rate rises last year were a “no-brainer” but it’s become difficult to know when to stop, according to a former Reserve Bank governor.
Central banks are in a “once-in-a-generation battle with inflation”, Glenn Stevens, RBA governor from 2006 to 2016, told a gas industry conference.
“Inflation is still way too high compared with central banks’ and national objectives,” he said in Adelaide on Tuesday.
“Last year it was a no-brainer that rates needed to rise and by quite a bit,” Mr Stevens said.
RBA governor Philip Lowe “just had to get on with that”, the respected economist told the Australian Petroleum Production and Exploration Association annual conference.
Quizzed about last week’s federal budget, Mr Stevens said it was “slightly expansionary” but implications for interest rates were “to be honest, not that much really”.
This year, the difficult task for most central banks is to figure out whether and when to stop raising official interest rates, Mr Stevens said.
The RBA needs to restrain Australian spending to reduce inflation while not inadvertently destabilising financial stability, he warned.
Looking ahead, Mr Stevens tipped more turbulence but said Australia was unlikely to see a repeat of 2008 – the last global financial crisis, which he navigated as governor.
Marion Rae
(Australian Associated Press)
