New insights from the central bank now suggests the uncertainty around the length of what has now been a month-long conflict is \u201clikely to pose a material adverse supply shock to the global economy\u201d in the next few months.<\/p>\n
<\/p>\n
The jump in global oil prices after escalating military strikes by the US and Israel on Iran have driven oil above 100 dollars a barrel. Picture: George Chan\/Getty Images<\/p>\n
While the RBA used the statement to warn that it could not stop inflation increasing in the near-term, it had a positive message for Aussies feeling the pressure.<\/p>\n
Well-timed cash rate decisions, it stated, could mean the RBA is able to lower the risk that high fuel prices will turn into long-term high inflation.<\/p>\n
While this confidence in monetary policy sounds promising, swift and accurate decision making from the RBA will rely on strong certainty and consensus from board members.<\/p>\n
This month\u2019s rate rise was only narrowly approved however, with four of the nine RBA board members voting in favour of a hold.<\/p>\n
<\/p>\n
The RBA board struggled to agree on a decision at its March meeting. Picture: NCA NewsWire\/Christian Gilles.<\/p>\n
\u201cWhile they agreed that financial conditions would probably need to become more restrictive, they felt there was merit in delaying any tightening of monetary policy until the potential effects of the current conflict in the Middle East become clearer,\u201d the statement read of the four \u2018hold\u2019 voters.<\/p>\n
\u201cThe case to keep the cash rate target unchanged at the current meeting centred on concerns about the effect of heightened uncertainty on the outlook for the economy.<\/p>\n
\u201cThis uncertainty could mean that the potential benefits of waiting for a little more information outweighed the potential costs.\u201d<\/p>\n
High inflation<\/p>\n
The RBA\u2019s forecast at its February meeting had been for inflation to continue to remain above target, following the pattern observed since October last year.<\/p>\n
<\/p>\n
Inflation has been high in Australia for six months. Picture: Getty<\/p>\n
Since then, the board says data suggests that the job market has become slightly stronger and more competitive for workers.<\/p>\n
The statement also reveals that the bank thinks financial conditions are not especially restrictive, meaning the economy hasn\u2019t slowed as much as expected after February\u2019s hike.<\/p>\n
\u201cIt was already clear that global energy production and distribution had been disrupted significantly and that there had been considerable increases in the global prices of oil and natural gas,\u201d it stated.<\/p>\n
\u201cHigher petrol prices would flow through directly to headline inflation in Australia and globally in the near term. Sustained higher oil prices would also boost inflation more broadly over time.\u201d<\/p>\n
Trimmed mean inflation, used to help decide the cash rate, is currently sitting at 3.4%, outside of the RBA\u2019s target.<\/p>\n
Global fears<\/p>\n
The RBA has warned it\u2019s not just Australia feeling the pressure, saying rate rise forecasts are up in \u201calmost all economies\u201d off the back of the Middle East conflict.<\/p>\n
That includes the central banks in the US and the United Kingdom, which had been expected to lower interest rates in 2026.<\/p>\n
<\/p>\n
The Bank of England. Picture: Getty<\/p>\n
\u201cOther countries were also seeing underlying inflation remaining somewhat above their central banks\u2019 targets,\u201d it stated.<\/p>\n
The statement revealed the RBA\u2019s key focus is showing \u201cclear commitment\u201d to returning inflation to target, sending a clear message that more hikes are just around the corner.<\/p>\n
\u201cIf medium- and long-term inflation expectations increased, it would ultimately require significantly more contractionary monetary policy,\u201d the board warned.<\/p>\n
All four of Australia\u2019s biggest banks are anticipating a rate rise when the board next meets on 5 May.<\/p>\n","protected":false},"excerpt":{"rendered":"If oil prices continue to remain elevated, Australians can expect headline inflation to lift to 5% in just…\n","protected":false},"author":2,"featured_media":575895,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64,63,99,164],"class_list":["post-575894","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-au","tag-australia","tag-business","tag-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/575894","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=575894"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/575894\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/575895"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=575894"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=575894"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=575894"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}