MNI BRIEF: RBA Still Doubts Underlying Inflation Sustained

The Reserve Bank of Australia sees Moscow's invasion of Ukraine as a contributor to headline inflation but remains unconvinced that underlying inflation is sustainably within the 2% to 3% target range which would justify a rise in interest rates.

The comments were included in the minutes of the RBA’s March meeting, released on Tuesday, which show the central bank sees “uncertainties about how persistent the pickup in inflation will be” despite the impact of the war on global energy markets and ongoing supply side problems, see: MNI STATE OF PLAY: Dovish RBA Waits On Wages Growth.

“Members noted headline inflation would increase by more than underlying inflation in the near term because of the effect of global developments on petrol prices,” the minutes said. “While inflation had picked up, members agreed it was too early to conclude that it was sustainably within the target band.”

Underlying inflation is at 2.6% while headline inflation is at 3.5% in Australia. Official rates have been held at a record low 0.10% since 2020.