ASX trims early gains after RBA warning; Bank of Japan lifts rates

Australian shares pared early gains approaching lunchtime on Friday after the Reserve Bank of Australia warned of inflation risks stemming from surging energy costs and the artificial intelligence investment boom.

The S&P/ASX 200 Index was down 2 points to 8730.7, following a 0.4 per cent gain on Thursday. Only four of the 11 sectors were in the black, down from eight in early trade.

In commodities markets, oil prices fell, extending losses on reports that additional Saudi crude barrels could reach global markets and ease supply concerns. The Brent crude price dropped 0.7 per cent to $US104, while West Texas Intermediate fell 0.7 per cent to $US101.22.

Attention on Friday is on the Bank of Japan, which is expected to raise interest rates to a 31-year high and signal its readiness to keep pushing up borrowing costs.

Closer to home, Reserve Bank of Australia governor Michele Bullock told lawmakers that the central bank’s board will consider whether the three interest rate increases already delivered this year are enough to return inflation to target within a reasonable timeframe. Markets imply a 94 per cent chance that the RBA will raise the cash rate to 4.6 per cent when it meets September 28 to 29.

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