position to australia, and have responded with higher interest rates, in some cases to a level substantially higher than that in australia. in broad terms, the rba and many other central banks are managing two risks. one is the risk of not doing enough, which would result in high inflation persisting and then later proving very costly to get down. the other is the risk that we move too fast, or too far, and that the economy slows by more than is necessary to bring inflation down in a timely way. the path here is a narrow one. it is still possible for us here in australia to navigate this path, especially if inflation and wage expectations remain contained and issues on the supply side continue to be resolved. but it is also possible that we are knocked off that narrow path. not surprisingly, given the uncertainties, there are a range of views in the community about where the main danger lies. some are more concerned about the prospect of a sharp rise in unemployment in the near term, while others are more concerned about the prospect of inflation staying too high, which would in time entail even higher interest rates and a sharper rise in unemployment. as the central bank, we have a critical mandate to preserve medium - term price stability and we are committed to that objective. if we don't get on top of inflation and bring it down in a timely way, the end result will be even higher interest rates and more unemployment in the future. the instrument that we have to achieve this is interest rates which, i acknowledge, can be a blunt instrument. we are very conscious that the impact is being felt very unevenly across the community. around one - third of households have a home loan, and many are finding managing the higher interest rates very difficult. this is only one channel through which monetary policy works, though. changes in interest rates also affect asset prices, including housing prices and the exchange rate, and they alter the incentive for all households to save and spend. they also affect expectations of the future, which can affect spending plans and price - and wage - setting behaviour. these various transmission channels take time to work and their effects are not felt evenly across the community. as difficult as this unevenness is, our job as australia's central bank is to deliver low inflation for all australians and to do so in a way that best contributes to the collective economic welfare of the australian people. the central forecasts and some uncertainties i would now like to turn to the bank

philip lowe : opening statement - house of representatives standing committee on economics opening statement by mr philip lowe, governor of the reserve bank of australia, to the house of representatives standing committee on economics, canberra, 17 february 2023. * * * good morning chair and members of the committee. thank you for holding this hearing. last week, the reserve bank board increased interest rates by a further 25 basis points. this brings the cumulative increase in interest rates since may last year to 3¼ percentage points, with the cash rate target currently standing at 3. 35 per cent. i would like to begin today by discussing why the increase in interest rates has been necessary and the outlook for the next couple of years. high inflation and interest rates at its core, the rise in interest rates has been required to make sure that the current period of high inflation is only temporary. this is our job as australia's central bank. in the december quarter, the inflation rate reached 7. 8 per cent. this is the highest rate since 1990. the inflationary pressures were broadly based, with the prices of almost three - quarters of the items in the cpi basket increasing by more than 4 per cent last year. in underlying terms, the inflation rate reached 6. 9 per cent in the december quarter. again, this is the highest rate in a number of decades and it is higher than we were expecting just a few months ago. high inflation is damaging and corrosive. it hurts people, puts pressure on household budgets and erodes the value of people's savings. it increases inequality and hurts people on low incomes the most. high inflation also damages longer - term economic performance, making the environment uncertain for planning and investing. and if inflation does become ingrained in people's expectations, bringing it back down again is very costly. history teaches us that once inflation becomes ingrained the end result is even higher interest rates and even greater unemployment to bring inflation back down. it would be dangerous, indeed, not to contain and reverse this period of high inflation. this episode of high inflation has its origins mainly in developments on the supply side but, over time, demand - side factors have become more prominent. it emerged in the wake of the covid supply chain disruptions and russia's invasion of ukraine, and also strong domestic demand due to the bounce - back from covid and the large policy stimulus during the pandemic. 1 / 5 bis - central bankers'speeches most advanced economies are in a similar