December 4, 2023


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Rising petrol prices, and worsening Chinese economy, keep Reserve Bank on edge#Rising #petrol #prices #worsening #Chinese #economy #Reserve #Bank #edge

The Reserve Bank has signalled that inflation remains a clear and present danger to the economy and another interest rate rise can’t be ruled out.

It says the recent rise in petrol prices clearly demonstrates the process of returning inflation to target could be uneven.

That’s despite evidence that twelve interest rate rises since May last year are continuing to slow the economy.

While the RBA board left the cash rate on hold at its meeting a fortnight ago, the minutes of the meeting released this morning show the battle to get inflation down from 4.9 per cent to the 2 to 3 per cent target zone is far from over.

It was Philip Lowe’s final meeting as Reserve Bank governor.

Inflation ‘still too high’

In considering whether to inflict another rate hike on households, the RBA Board noted that inflation was “still too high” and “was expected to remain so for an extended period”.

While headline inflation is slowing, the minutes show there is concern that services inflation might take a while to decline.

Members also noted the labour market remained tight, with the jobless rate hovering near a 50-year low.


“Were inflation to remain above target for an even longer period, this could cause inflation expectations to move higher which would likely require an even larger increase,” the minutes warn.

However, members also note that the economy is “experiencing a period of subdued growth” led by household consumption, as high inflation and rate rises weigh on household budgets.

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