RBA raises the alarm: Inflation risk is higher for longer

<p>Reserve Bank of Australia Statement on Monetary Policy (SoMP).</p><ul><li>
Board's priority is to return inflation to target</li><li>Considered whether
to pause in Nov, decided a hike would provide more assurance on
inflation</li><li>In hiking, judged
risk of inflation staying higher for longer had increased</li><li>Whether further
tightening needed will depend on data, balance of risks</li><li>Inflation more
persistent than expected, economy a bit stronger than expected</li><li>Potential for
further upside surprises to inflation, from both domestic and
external factors</li><li>Some measures of
inflation expectations edging up, important to stop this</li><li>Board mindful that
many households facing painful squeeze on budgets</li><li>RBA raises forecasts
for inflation and GDP growth, trims unemployment and wage forecasts</li><li>Sees trimmed mean
inflation at 4.5% end 2023, 3.25% end 2024, 3.0% end 2025</li><li>Sees CPI at 4.5% end
2023, 3.5% end 2024, 3.0% end 2025</li><li>Sees wage growth at
4.0% end 2023, 3.7% end 2024, 3.5% end 2025</li><li>Sees unemployment at
3.75% end 2023, 4.25% end 2024, 4.25% end 2025</li><li>Sees GDP growth at
1.5% end 2023, 2.0% end 2024, 2.25% end 2025</li><li>Forecasts assume
cash rate peaks around 4.5% before declining to 3.5% by end 2025</li><li>Revises up
population forecasts, assumes peak was 2.5% in q3 followed by decline
to 1.5% avg</li></ul><p>Headlines via Reuters.</p><p>Bolding above is mine. The Bank forecasts both headline and core inflation not returning to the band until the end of 2025. The bank, if you need a reminder is 2 to 3%. The December of 2025 forecast is 2.9%, which of course is the extreme top of the band. The earlier complacency of the RBA is biting them, and the Australian people. </p><p>Full text is here:</p><p><a href="https://www.rba.gov.au/publications/smp/2023/nov/" target="_blank" rel="nofollow">Statement on Monetary Policy
November 2023</a></p>

This article was written by Eamonn Sheridan at www.forexlive.com.