RBA recap – more alert to upside inflation risks, less confident inflation is moderating

The Reserve Bank of Australia left the cash rate unchanged yesterday, as widely expected:

Via Westpac, a recap, in brief from a much longer report:

The RBA is more alert and less confident in its inflation fight.

  • the RBA Board left the cash rate on hold after only considering a rate hike or staying the course. That is, a rate cut was not discussed. What’s more, the tone of the statement and rhetoric from the RBA Governor Michele Bullock suggested a step up in concerns around upside inflation risks, despite repeating the now familiar mantra of not ruling anything in or out.
  • In perhaps one of the more telling remarks of the press conference, Governor Bullock said “we need a lot to go our way if we are going to bring inflation down to the 2-3% target” and the economy’s narrow path is “getting a bit narrower.”

Tough talk from the RBA and Governor Bullock is not misplaced. Its better to sound hawkish, this in itself can count some way towards a tighter policy. On the other hand, sounding dovish can have an easing impact, at the margin.

AUD/USD update, helped by a softer US dollar.

This article was written by Eamonn Sheridan at www.forexlive.com. Source