RBA Governor to appear before lawmakers for anti-inflation campaign hearings

Australian lawmakers seem to be rather displeased with the recent rate hikes, which is why the country’s top central banker was summoned to appear at several parliamentary hearings this week. The Reserve Bank of Australia Governor Philip Lowe will have to explain some of the recent decisions, after surprising many with a hawkish turn on interest rate hikes.

The increase in interest rates has caused a strong backlash, as it added more pressure to the already high cost of living in the country.

RBI governor to explain the bank’s recent decisions

Lowe is scheduled to appear before the lawmakers in two hearings this week, with the first one coming this Wednesday, followed by the second one on Friday. The lawmakers want an explanation regarding the RBI’s anti-inflation campaign, which has boosted interest rates by 325 points over the course of the last 10 months.

The latest increase came only last week, but the central bank compounded the blow by announcing even more increases that are scheduled to come down the road. It explained that this is necessary to contain inflation, which is currently higher than it has been at any point in the last three decades.

Lowe is already facing criticism and mistrust due to a private lunch with other bankers, which he attended without making a public appearance or statements involving the policy shift. The controversy surrounding the RBI governor even led to speculation that he might not be re-appointed for his second term. Meanwhile, the government has made an independent inquiry into the policy record and governance of the central bank, likely planning to use the results to make light of the situation in the upcoming hearings.

A review of the RBI’s inner workings

Jim Chalmers, Australian Treasurer, spoke of the matter, highlighting an even broader issue in his review involving the way the central bank communicated its decisions and the context surrounding them. He said that this is a key issue discussed in the RBA Review panel and that he would receive the review later this year, on March 31st. After that, the government would have to make a decision regarding Lowe’s potential re-appointment, which will take place closer to mid-year.

Chalmers originally announced the review last year in July. He explained that it will assess issues, including RBA’s communication to the public, decision-making involving which inflation targets to follow, and similar matters.

The review itself comes after the central bank undershot its own inflation target of 2% to 3%, which was dominant for the majority of the previous decade. Additionally, it issued guidance during the pandemic, stating that rates were not supposed to go up until at least 2024. Then, the rates shot up over the 10-month period, reaching record highs. In the meantime, the consumer price inflation is seeing its own 32-year high of 7.8%, without the possibility of dropping back down to 2-3% before at least 2025.