Hot jobs, accelerating services inflation, rebounding house prices and weak labour productivity tipped the RBA board’s hand to lift the cash rate for the 11th time this cycle to 3.85 per cent.
and the evidence from overseas is that price rises for services are proving more persistent than hoped.While the RBA does not target house prices, higher asset prices add to inflation because home owners feel wealthier and spend more.
Fourth, solid nominal wage rises and weak labour productivity growth are combining to push up the real cost of labour and increase the risk of wage-price persistence. Domestic inflation is forecast to not return to the very top of the RBA’s 2-3 per cent target band until mid-2025. From now on, the RBA says: “Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve.”
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