RBA's Inflation Fight Hit by Permanent Price Hikes
The Reserve Bank of Australia (RBA) is facing a new challenge in its fight against inflation, as the ongoing Middle East conflict continues to drive up fuel and fertiliser prices. Governor Michele Bullock warned that these higher costs will be 'permanently higher', making it harder for the RBA to meet its 2.5% target.
Bullock stated that unemployment remains 'still quite low historically' at 4.6%, but the bank is losing faith in its 'slowly, slowly' strategy, which has kept inflation outside the 2-3% target range for six years. The RBA aims to get back into this range, but it's unclear how they will achieve this.
The conflict is having a lasting impact on prices, with fuel and fertiliser costs expected to remain high. Bullock expressed concern that businesses may start raising their prices as well, making it even more challenging for the RBA to control inflation without further increasing interest rates.