Reserve Bank of Australia Monetary Policy Statement: There are further upside risks to inflation, and interest rates need to be raised

　　The Reserve Bank of Australia (RBA) released its quarterly monetary policy statement, where officials flagged the risk of further upside surprises in inflation after the latest rate rise, while also raising forecasts for economic growth and employment.

　　As for the policy outlook, the board discussed keeping interest rates steady at its November policy meeting this week, judging that higher rates were needed to ensure inflation moderated.

　　"The RBA's top priority is to get inflation back to target. Whether further monetary policy tightening is needed to ensure inflation reaches the target over a reasonable timeframe will depend on data and evolving risk assessments."

　　On the economic outlook, the statement also noted the possibility of further unexpected increases in inflation, mainly due to domestic cost pressures and external factors such as global warming. Such a surprise could undermine inflation expectations, so higher interest rates are needed.

　　Consumer price inflation slowed to 5.4 per cent in the third quarter from 7.8 per cent last year, but was still higher than expected and well above the RBA's target of 2-3 per cent. Stubborn service sector inflation led the Reserve Bank of Australia to raise its forecasts for consumer price index and core inflation. Inflation is expected to be 3.25% by the end of next year and slightly below 3.0% by the end of 2025, both about 0.25% higher than previous forecasts.

　　The economy is now expected to grow at an annual rate of 1.5% in the current quarter, up from 1.0% previously. The end-2024 growth rate was revised up by 25 basis points to 2.0%, while the end-2025 forecast was maintained at 2.25%.

　　For the job market, the statement noted that this means the unemployment rate is expected to peak at 4.25 percent in 2024, rather than the previous forecast of 4.5 percent. Unemployment, at 3.6%, is near its lowest level since the 1950s.

　　The RBA also said past interest rate hikes combined with high inflation had eroded real incomes, with many households facing a struggle to make ends meet.