Reserve Bank of Australia Warns of Low Tolerance for Stubborn Inflation

By Stuart Condie

SYDNEY–The Reserve Bank of Australia continues to warn that further interest-rate increases may be needed if it sees signs that inflation isn’t under control.

Minutes of the Oct. 3 board meeting published Tuesday showed that RBA board members mulled raising the cash rate by 25 basis points amid worries that persistently high gasoline prices could slow progress in lowering inflation over coming months.

“The board has a low tolerance for a slower return of inflation to target than currently expected,” the RBA said. The bank is aiming to return inflation to its 2%-3% target.

The RBA raised the official cash rate by 400 basis points over 13 months through June 2023. It kept the rate at 4.10% for a fourth consecutive month at the October meeting, Michele Bullock’s first since replacing Phillip Lowe as RBA governor.

The decision to hold centered on the belief that the impact of prior increases won’t become fully evident for some months. Any further rise depends on upcoming economic data, the RBA said.

The board holds its penultimate meeting of 2023 on Nov. 7.

“Members observed that, prior to the November meeting, they would receive additional data on economic activity, inflation and the labor market, as well as a set of revised staff forecasts,” the RBA said.

Core services inflation remains persistent internationally and Australia’s monthly consumer-price index indicates that domestic services prices are coming down more slowly than the RBA would like, according to the September minutes.

Annual inflation inched higher to 5.2% in August from 4.9% in July, according to monthly data seen by economists as less reliable than quarterly figures. Automotive fuel inflation was running at 14% in August, reversing from a 7.6% annual decline in July.

Annual CPI was at 6.0% in the June quarter, compared with 7.0% in the March quarter and the December quarter’s 7.8% peak. September monthly and quarterly data are set for release next week.

Write to Stuart Condie at

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