What the Federal Reserve's style has changed its policymaking

What the Federal Reserve's style has changed its policymaking

SARAH FERGUSON: Just one question, it is, first of all, it is Michele Bullock's first go as governor, her first rate decision. What is the difference in style compared to previous governor of the United States?

ALAN KOHLER: Absolutely none. The statement today was almost identical to Philip Lowe's last statement, so I'm sure that was deliberate. She said that she wanted to make the point that she's an agent of continuation rather than an agent of change. I'm sure that was what she intended.

What are the reasons why Sarah ferguson gave today for keeping the cash rate on hold?

The key phrase was that the data are consistent with inflation coming down to the target range of 2 to 3 percent by late 2025.

I mean it's interesting that they are talking about this date. But I think everyone is kind of focused a bit on inflation needs to come down quickly, and they're actually talking about two years. When I heard that I had actually misheard it at first and I was mishearing 2025 for '24 but actually we are talking about, is it the end of '25, 2025?

ALAN KOHLER: They are and that's what they've always talked about. It's always, that has been their intent all along, and that's because the Reserve Bank, possibly more than other central banks globally, is very concerned with doing, or keeping employment as high as it can while keeping inflation under control.

So it doesn't want to do it quickly, but they want to try to preserve as much employment as possible while bringing inflation back to the target range of 2 to 3 percent.

SARAH FERGUSON: Now both Philip Lowe and Jim Chalmers for a long time have been talking about what an exceptional number the unemployment figure is but what is the Reserve Bank, when they talk about that forecast and what will happen to unemployment, what are they saying?

Their forecast for unemployment is 4.5 percent next year and in a sense, that's a precondition for getting inflation down to within 2 to 3 percent the year after.

So their whole kind of Modus operandi is about unemployment. They plan on aiming at an unemployment rate that doesn't cause inflation to go up and that's 4.5 percent.

In the Government's employment white paper recently, the treasurer Jim Chalmers said full employment being someone who wants a job is able to get one within a reasonable time. Now, he's at pains to say there isn't a discrepancy. Is there a discrepancy between that targeting of an employment figure of 4.5 per cent and what the treasurer is saying?

ALAN KOHLER: Of course there is. I mean that's just woolly politics. There are currently 540,000 or so, around 540,000 people unemployed.

There must be another 120,000 people out of a job in order to be 4.5 percent. Now the Reserve Bank doesn't say that, but that is the point.

But if that statement, the definition that Jim Chalmers has got, which in the White Paper means anything at all, it means that unemployment should be lower than 3.7 percent, it seems to me but he is trying to avoid any idea of conflict.

At odds, he says, they are at odds.

SARAH FERGUSON: Just coming back to today's figures, can you just tell me to finish Alan, how big a deal the rising oil prices are and what impact they could have on inflation over the months ahead.

It's a big deal, he said. We don't know what is going to happen. Saudi Arabia and Russia are throttling supplies and predictions generally are that the price of oil will go up to $100.

So I think, you know, the fuel prices will stay above $2.

If the petrol price goes above $2 and doesn't go up, then that won't push inflation up, and the Reserve Bank tends not to pay too much attention to petrol prices. It looks for less volatile items and excludes volatile ones like that.

So look, there is a lot of uncertainty, said Michele Bullock. They don't really know what's going on, they're flying blind.

Jerome Powell, the head of the Federal Reserve, said the Fed is navigating by the stars under cloudy skies.

We'll leave that, a note of uncertainty - stars and cloudy skies. Mr. Alan Kohler, a pleasure always, thank you.