Price pressures “low:” Reserve Bank

The Reserve Bank is not likely to raise its marker interest rate, which now stands at 3 per cent, before the end of the year.

But Australia’s commercial banks are contemplating rate rises, in the not too distant future, arguing that rising costs are making that necessary.

The Reserve Bank revealed, in a statement on monetary policy that it released today, that it still believes emerging inflationary pressures in Australia are moderate.

It also said that the current situation might have made further cuts in its marker rate possible.

But it said it decided, instead,  to keep the official rate on hold, as the Australian economy is gathering strength and the global economy is stabilising.

Even so, the bank managed to sound quite optimistic, on price pressures.

Significantly, it said:-”Recent data on prices continue to suggest that price pressures in the economy are abating gradually.

“Over the year to the June quarter, the CPI increased by 1.5 per cent, the lowest annual increase for a decade, while underlying inflation was around 3¾ per cent.

“This unusually large difference between CPI and underlying inflation reflects significant falls in the price of fuel and the ABS estimate of the price of deposit & loan facilities facing the household sector.

“Importantly, recent quarterly outcomes for underlying inflation have been below the rates recorded for most of the previous year, and a further reduction is expected over the period ahead.

“Upstream price pressures are moderating and there are signs that wage growth is slowing in an environment of weaker demand for labour. Measures of inflation expectations also remain relatively low.”

This is very cheerful talk, for the Reserve Bank, which usually reacts sharply to the slightest sign of resurgent inflation.