MNI BRIEF: RBA Says Weak Inflation Needs Accommodative Policy

Despite Australia's stronger than expected economic recovery, wages and price pressures remain subdued and this requires monetary policy to remain accommodative, the Reserve Bank of Australia noted in minutes from its May meeting.

While inflation, currently at an annualised 1.1%, is expected to move up into the RBA target range and reach 3% in the June quarter, it is then likely to fall back below the 2-3% target. Wage growth is expected to remain weak, which meant the RBA's goal of full employment to help achieve the inflation target was some distance off, the minutes said.

The RBA voted to keep interest rates on hold at the record low 0.10% at its last meeting and agreed to consider additional bond purchases under its AUD$200 billion QE program. At the July meeting, the board will also consider extending its yield control target to three-year government bonds maturing in November 2024. The current program targets the April 2024 series.