Australian Central Bank Predicts Prolonged Inflation Above Target

According to BlockBeats, the Reserve Bank of Australia (RBA) anticipates that core inflation will remain above its target range until mid-2026. This expectation is driven by faster-than-expected growth in consumer demand and housing prices, which limits the scope for further interest rate cuts. On Tuesday, the RBA maintained the cash rate at 3.60%, as expected, following three rate cuts earlier this year in February, May, and August. The RBA's statement highlighted recent data indicating stronger economic growth, persistent inflation, and a still-tight labor market, suggesting the economy's potential capacity is more limited than previously thought. "These indicators present a complex financial environment, consistent with the assessment that policy is currently near neutral valuation," the statement noted. In fact, the cash rate is now below some models' core estimates of the neutral rate. The RBA now expects its closely monitored trimmed mean core inflation rate to accelerate to 3.2% by the end of this year, up from the current 3% and significantly higher than the previous forecast of maintaining 2.6% over the coming years. Core inflation is projected to return to the target range of 2% to 3% by the second half of 2026 and decrease to 2.6% by the end of 2027.