Dow Jones Newswires: Reserve Bank of Australia still jittery about stubborn inflation risks

by | May 4, 2023 | Stock Market

SYDNEY — The Reserve Bank of Australia continues to warn that while inflation pressures have peaked, the risks that inflation remains higher for longer are significant and further interest-rate increases may be needed. In its latest monetary-policy statement released Friday, the Australian central bank said that while inflation expectations are consistent with price pressures returning to target by mid-2025, a continuation of that is not yet assured.

Stubborn services price inflation and the risk that wages grow by more than expected in an economy where productivity growth has been negligible for three years is ensuring that the RBA remains cautious about inflation risks. “The longer inflation remains above target, the greater the risk that inflation expectations rise and price and wages setting behavior might adjust accordingly,” the RBA said. “If high inflation were to become entrenched in people’s expectations, it would be very costly to reduce late,” the RBA added. “Some further tightening of monetary policy may be required,” the RBA said. The comments come after the RBA announced a further rise in the official cash rate this week to 3.85% from 3.60%. It w …

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