RBA’s Kent: Forward guidance in Australia might be less useful than in the United States

In a speech in Canberra on Monday, Reserve Bank of Australia (RBA) Assistant Governor Christopher Kent said that the ”forward guidance in Australia might be less useful than in the United States.”

Further comments

Variable rate mortgages are a key difference of the Australian system.

No evidence monetary policy overall is more potent in Australia than elsewhere.

Arrears rates here remain low, similar to economies with much more fixed-rate lending.

Most borrowers have buffers to help manage higher interest rates.

Worth reviewing the RBA’s approach to forward guidance from time to time.

Including considering other ways the RBA might clarify the nature of its reaction function.

Market reaction

AUD/USD is consolidating its rebound following these comments. The pair currently trades at 0.6465, up 0.07% on the day.

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