AUD: RBA flags oil-driven inflation risks – Rabobank
|Rabobank’s Global Strategist Michael Every notes the Reserve Bank of Australia (RBA) minutes stress that it is not possible to predict the cash rate path with confidence given Middle East conflict uncertainty. The RBA estimates Oil at around $100 would lift headline CPI to about 5% in Q2, implying further tightening is likely, even as some policymakers already worry about stagflation risks.
RBA uncertainty and stagflation concerns
"Meanwhile, in Australia the RBA minutes’ key line was: “it was not possible to predict the future path for the cash rate target with any confidence, given the high degree of uncertainty around the breadth and duration of the current conflict in the Middle East.” It added that the direct effect of oil prices remaining around $100 would on its own lift headline CPI to around 5% in Q2, 0.75% higher than expected in February, and sustained higher oil prices would boost inflation more broadly over time. A majority agreed further tightening in policy would likely be required in the near term, but a minority was already worrying about the ‘stag’ part of stagflation."
"The RBA is right about the Middle East – and let’s repeat that one then has to look at that complex region through a broad geopolitical lens, not a narrow “because markets/elections” one that said this war wasn’t going to happen. Oh - and that today saw half a million young Aussie workers get up to 42% pay increase due to changes to minimum wage rates."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.