SYDNEY, Oct 19 (Reuters) – A senior Australian central banker flagged on Monday signs that the labour market was loosening faster than expected, but cautioned against reading too much into a month of data.
Christopher Kent, assistant governor of the Reserve Bank of Australia, said markets had trimmed the probability of another hike in interest rates after data last week showed unemployment unexpectedly hit a five-year high of 4.7% in September – and that move made sense.
“I’d always be a bit cautious about the monthly numbers,” said Kent, who heads the RBA’s financial markets unit, at a banking conference.
He added that a key question facing policymakers was whether the loosening in the labour market was due to weakening demand or fast-rising labour costs. He said the quarterly inflation data due next week would help to answer the question.
“But even having said that, there are indicators where the labour market has become less tight a bit faster than we might have forecast,” he said.
The resilience in the labour market is one reason the RBA raised interest rates four times this year to 4.6% to fight inflation, but the underlying measure stayed stubborn at 3.6% for three straight months and risks are still tilted to the upside.
Markets imply a 30% probability that the RBA will lift rates at its next policy meeting on November 2 and 3, but a move by December is about 50% priced in.
(Reporting by Stella Qiu and Wayne Cole; Editing by Clarence Fernandez and Thomas Derpinghaus)
