RBA Deputy Governor Cites Phillips Curve in Rate Hike Strategy
RBA Deputy Governor Andrew Hauser said the Phillips Curve relationship suggests the central bank's rate hikes can curb inflation without a sharp rise in unemployment.
Reserve Bank of Australia Deputy Governor Andrew Hauser said the central bank is relying on the Phillips Curve relationship to ensure its aggressive rate-hiking cycle cools inflation without causing a sharp deterioration in the labor market.
Speaking at an event, Hauser explained that the historical trade-off between inflation and unemployment suggests the RBA's rapid rate increases can dampen price pressures while keeping job losses contained. The Phillips Curve, a cornerstone of macroeconomic theory, posits an inverse relationship between wage growth and unemployment. Hauser's remarks come as the RBA has raised its cash rate by 400 basis points since May 2022, one of the most aggressive tightening cycles in the bank's history. Traders tracking the RBA's policy path can monitor real-time rate expectations and bond yield movements on NowPrice's live dashboard.
Looking ahead, markets will focus on upcoming Australian inflation data and labor force reports to gauge whether the Phillips Curve trade-off is materializing as the RBA expects. Any deviation could alter the pace of future rate decisions, with the next RBA meeting scheduled for August.