Inflation brings forward rate timing: RBA


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The rise in inflation has likely brought forward the timing of an increase in the cash rate, the Reserve Bank of Australia has warned.

In the minutes of its April board meeting, the RBA said it expected a further increase in inflation, with measures of underlying inflation in the March quarter expected to be above three per cent – above the two to three per cent target.

“These developments have brought forward the likely timing of the first increase in interest rates,” the minutes said on Tuesday.

“Over coming months, important additional evidence will be available on both inflation and the evolution of labour costs.”

The consumer price index for the March quarter is due on April 27, while the wage price index for the same period is released on May 18.

“Consistent with its announced framework, the board agreed that it would be appropriate to assess this evidence and other incoming information as it sets policy to support full employment in Australia and inflation outcomes consistent with the target,” it said.

Noting the four per cent unemployment rate, a further strengthening of aggregate wages growth and broader measures of labour costs was expected.

The pick-up was still expected to be only gradual, although there was uncertainty about the behaviour of wages at historically low levels of the unemployment rate.

“Overall, the growth outlook remained positive for this year and next,” the minutes said.

“At the same time, rising prices were impinging on households’ spending power and the floods had been very disruptive for many communities.”


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