Reserve Bank of Australia Forecasts Higher Inflation

Although markets were privy to New Zealand food prices report, which increased by 1.2 percent and boosted the underlying currency incrementally in the overnight, attention was focused on the Reserve Bank of Australia monetary assessment. In statements that helped to support the Australian dollar briefly, monetary authorities noted that inflationary pressures are forecasted to accelerate even further into next year.

Looking ahead, the statement notes that inflation is likely to heighten to 3 percent at the end of the year, and subsequently remain atop of the bank?s target range for much of the following year. Subsequently, the hawkish statements come not even a week after authorities decided to raise the benchmark overnight cash rate by 25 basis points. As a result, attention will be placed on Governor Glenn Stevens? testimony to Parliament this week. A bold tone will all but solidify further speculation on another round of monetary tightening. Incidentally, on the Kiwi side of things, focus will fall on tonight?s retail sales figures. Expectations are for spending to pare back on higher interest rates.