In a speech in Sydney, Reserve Bank of Australia Assistant Governor Sarah Hunter said inflation expectations have not become de-anchored, with new research showing that households appear to have looked through the recent spike in inflation more than the central bank might have expected.
The relationship between current wage expectations and inflation expectations is relatively weak, the RBA also noted.
“So we’re not currently concerned that expectations could become de-anchored in the near term,” said Hunter at an Citi investment conference.
“But we do think it’s important that we track how they’re evolving and that we understand how expectations are formed, so we can monitor whether there are any signs of this risk materialising in the future.”
The RBA has kept rates steady since November, judging that the cash rate of 4.35% – up from a record-low 0.1% during the pandemic – is restrictive enough to bring inflation to its target band of 2%-3% while preserving employment gains.
However, underlying inflation has remained sticky at 3.9%, one reason that policymakers do not expect inflation to slow to the midpoint of the target band in 2026. Swaps imply just a 40% probability that the RBA can cut in December.
Source: Economy - investing.com
