The Reserve Bank is nowhere near declaring victory in the war on inflation, but the data suggests we’re closer to the end than the beginning.
Inflation fell to 4.1% in the December 2023 quarter, compared to 7.8% the previous year, according to the Australian Bureau of Statistics.
The Reserve Bank has forecast inflation will fall to 3.2% by the end of this year and 2.8% by the end of next year. However, in the minutes from the Reserve Bank’s previous monetary policy meeting, board members “noted that it would take some time before they could have sufficient confidence” that inflation would return to the target range of 2-3% within a reasonable period of time.
“Uncertainty about the outlook for the economy was high. Members also observed that the costs of inflation not returning to target within the envisaged timeframe were potentially very high. Given this, members agreed that it was appropriate not to rule out a further increase in the cash rate target,” according to the minutes.
“They also agreed that it would be important to continue to pay close attention to developments in the global economy, trends in domestic demand, and the outlook for inflation and the labour market. Members reiterated their resolve to do what is necessary to return inflation to target.”
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