SYDNEY, AUSTRALIA – SEPTEMBER 5: A man looks at dairy products in a supermarket in Sydney, Australia, on September 5, 2024. Australia is currently facing a serious cost of living crisis. The price increases of necessities such as food, housing and utilities have greatly exceeded the growth of wages, making it difficult for many families to maintain balance of payments.
James Gurley | Getty Images News | Getty Images
On Wednesday, data released by the Reserve Bank of Australia showed that Australia's inflation rate in August had reached the Reserve Bank of Australia's target range, falling to 2.7% from 3.5% in July. release From the National Bureau of Statistics.
The fall puts interest rates below the Reserve Bank of Australia's target range of 2%-3% for the first time since August 2021.
However, a day earlier, the Reserve Bank of Australia said it did not think Australia would cut interest rates.
Australia's hawkish approach appears to be at odds with the Fed. Although the latest inflation data in August was about 2.5%, which was higher than the US central bank's 2% target, the Federal Reserve still decided to cut interest rates by 50 basis points last Wednesday.
On Tuesday, Reserve Bank of Australia Governor Michelle Bullock said that while the bank expected inflation to fall, possibly within the target range, this would be due to government reliefthe bank expects inflation to rise above the target range when these relief measures expire.
“The point I would make is that if the inflation data we get tomorrow has a two in front of it, then it's back in range, that doesn't mean we've got inflation under control. It doesn't mean that inflation continues to come back. into range,” Bullock stated at the press conference Following the Reserve Bank of Australia's decision on Tuesday to maintain the benchmark interest rate at 4.35%.
The Reserve Bank of Australia said in its monetary policy statement “Overall inflation is expected to decline further temporarily as federal and state living costs ease. However, our current forecast is that inflation will not return to target sustainably until 2026.”
Bullock warned that she hopes to see inflation “continue to fall into range and remain within range.”
Sean Langcake, head of macroeconomic forecasting at Oxford Economics, wrote in a report after the RBA's decision: “Upcoming consumer price index data will be muddled by the impact of federal and state government cost-of-living relief.
He said that while the rescue package would bring headline inflation to the top of the RBA's target range, the RBA would “review” the subsidies and focus on core inflation.
“To a large extent, the amount these subsidies take out of inflation this year will be added back next year when government spending is reduced, leaving underlying inflation little changed,” Longcake added.
Langcake said the RBA's decision to cut interest rates from other central banks around the world had “little impact” and predicted the RBA would keep interest rates stable until the second quarter of 2025.
He wrote, “The path back to target for core inflation is somewhat stalled, and it is difficult to see significant improvement in the short term. We believe the central bank will need to see three more inflation reports before it can feel comfortable starting an easing cycle.”