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Cliff Notes: Considering Near-Term Risks

This week, the RBA decided to leave policy unchanged for a fourth consecutive month. Given that it was Governor Bullocks’s first meeting at the helm, market participants were eager to dissect the decision statement for any changes in rhetoric or perceived risks. In the event, the decision statement was little-changed from August, apart from refreshed observations on the Monthly CPI Indicator, including “fuel prices have risen notably of late”. The RBA is certainly justified in highlighting near-term momentum in inflation. Indeed, we have upgraded our own inflation forecasts for Q3 and Q4 in light of the stickier services detail in the Monthly CPI Indicator, recent strength in crude oil prices and the languishing Australian dollar. These developments will be incorporated into the RBA’s staff forecasts next month following the more comprehensive Q3 CPI report of late-October. We expect their revisions to also be contained to the near-term, leaving intact inflation’s path back i ....

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