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COST PRESSURE EASES, BUT INFLATION STILL HIGH – PROT

2024-02-20 05:32

STOCKHOLM (Nyhetsbyrån Direkt) Cost pressure in Australia continues to ease but inflation is still too high because service prices are not falling fast enough.

This is evident from the minutes from the RBA meeting on February 6, when the policy rate was left unchanged at 4.35 percent as expected.

The committee chose between raising interest rates by 25 basis points or leaving them unchanged. The latter option weighed more heavily and was appropriate given balanced risks against the outlook.

The RBA continues to warn that further rate hikes cannot be ruled out, but adds that the path of policy rates will depend on how data develops and the assessment of risks.

The data so far has made the committee more confident that inflation will return to the target in a reasonable time, but at the same time it will take “some time” before they can be sufficiently confident that inflation will return to the target of 2 to 3 percent in 2025 , and the midpoint in 2026. The forecast that inflation will be back on target by 2025 is based on no further rate hikes.

They also noted that further interest rate hikes would not prevent them from lowering rates if the economy weakened.

Furthermore, it appears that data on the labor market and consumption have been weaker than expected. High inflation, higher taxes and interest payments have weighed on consumption at the same time that the labor market remains relatively tight and wage growth is dampened in some sectors.

The committee reiterated that it will closely monitor the global economy, trends in domestic demand and the outlook for inflation and the labor market.

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News agency Direkt

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