MNI BRIEF: RBA Holds, Wants More Evidence On Inflation

The Reserve Bank of Australia is forecasting that unemployment will fall below 4% but says that any increase in wages is likely to be gradual and could be below rates which will drive inflation “sustainably” into its 2% to 3% target range.

The RBA on Tuesday left official interest rates on hold at the record low of 0.10% and there was little change in its dovish outlook around inflation and interest rates, both of which remain lower than in other developed economies.

On core inflation, which is at 2.6%, the RBA said there is uncertainty around the sustainability. “The board has wanted to see evidence inflation is sustainably within the 2% to 3% target range before it increases interest rates,” the RBA statement said, see: MNI STATE OF PLAY: RBA Ponders Inflation Impact Of Govt Budget.

As well, the RBA said that although wages had picked up they were “still only around the relatively low rates prevailing before the pandemic.”