RBA Continues to Sound Warnings About Upside Inflation Risks
By James Glynn
SYDNEY--The Reserve Bank of Australia continues to sound warnings about upside inflation risks, saying in minutes of its June policy meeting that incoming data has reinforced the need for the central bank to remain vigilant, adding that the narrow policy path before it was "becoming narrower."
"Members agreed that it was important to convey that the information received since the previous meeting had reinforced the need to be vigilant to upside risk to inflation," according to the minutes published Tuesday.
"The extent of uncertainty at present meant it was difficult either to rule in or rule out future changes in the cash rate target," the minutes said.
The RBA left its official cash rate on hold at 4.35% at the policy meeting, but in comments to the media after the announcement, Gov. Michele Bullock stressed that upside risk surrounds the bank's inflation forecasts. Bullock added that a lot needs to go the RBA's way if it is to get inflation back into the 2% to 3% target band by the end of next year.
"Members agreed that the collective data received since the May meeting had not been sufficient to change their assessment that inflation would return to target by 2026, despite some elevated upside risk around the forecast," the minutes said.
Since the June 17-18 policy meeting, the RBA has received more worrying news on inflation, with the consumer-price index indicator for May coming in above expectations, adding to a string of inflation numbers of late that show price pressures remain significant.
The RBA is watching incoming data closely and will have seen second-quarter inflation data before the next policy meeting in August.
The policy meeting in August will also include a review of the RBA's economic forecasts.
Money markets are already pricing in a 40% probability that the RBA will raise rates again in August.
If inflation in the second quarter comes in higher than expected, a further hike will be virtually guaranteed, putting the RBA at odds with many of its global peers, which have either started to cut interest rates, or are signaling they will in the near term.
Write to James Glynn at james.glynn@wsj.com
(END) Dow Jones Newswires
July 01, 2024 22:00 ET (02:00 GMT)
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