Australia’s RBA optimistic on economy, but rates to stay low until 2024 By Reuters

© Reuters. FILE PHOTO: Two women walk next to the Reserve Bank of Australia headquarters in central Sydney, Australia February 6, 2018. REUTERS/Daniel Munoz/File Photo GLOBAL BUSINESS WEEK AHEAD

SYDNEY (Reuters) – Australia’s top central banker said on Tuesday coronavirus lockdowns would cause a sharp contraction in the economy this quarter but was confident activity would rebound quickly once restrictions were eased in the December quarter.

In a speech, Reserve Bank of Australia (RBA) Governor Philip Lowe also reiterated that interest rates were not expected to rise from record lows until 2024 given the persistently sluggish growth of wages.

Indeed, Lowe took issue with market pricing for rate hikes in late 2022 and 2023.

“These expectations are difficult to reconcile with the picture I just outlined and I find it difficult to understand why rate rises are being priced in next year or early 2023,” Lowe said after noting the considerable inertia in wages in Australia.

“While policy rates might be increased in other countries over this timeframe, our wage and inflation experience is quite different.”

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