RBA recap - more alert to upside inflation risks, less confident inflation is moderating

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RBA recap - more alert to upside inflation risks, less confident inflation is moderating

The Reserve Bank of Australia left the cash rate unchanged yesterday, as widely expected:

• RBA leaves cash rate unchanged at 4.35%, as expected
• RBA's Bullock: We did not consider the case for a rate cut today
• RBA's Bullock: We need a lot to go our way to bring inflation back to range

Via Westpac, a recap, in brief from a much longer report:

The RBA is more alert and less confident in its inflation fight.

• the RBA Board left the cash rate on hold after only considering a rate hike or staying the course. That is, a rate cut was not discussed. What's more, the tone of the statement and rhetoric from the RBA Governor Michele Bullock suggested a step up in concerns around upside inflation risks, despite repeating the now familiar mantra of not ruling anything in or out.
  
• In perhaps one of the more telling remarks of the press conference, Governor Bullock said "we need a lot to go our way if we are going to bring inflation down to the 2-3% target" and the economy's narrow path is "getting a bit narrower."

Tough talk from the RBA and Governor Bullock is not misplaced. Its better to sound hawkish, this in itself can count some way towards a tighter policy. On the other hand, sounding dovish can have an easing impact, at the margin.

AUD/USD update, helped by a softer US dollar.

                This article was written by Eamonn Sheridan at www.forexlive.com.

Source: RBA recap - more alert to upside inflation risks, less confident inflation is moderating

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