Aussie likely to be punished again if the RBA sticks to its cautious stance – Commerzbank

Australian quarterly inflation figures came in higher than market participants had expected. Economists at Commerzbank analyzed Aussie’s outlook after the Consumer Price Index (CPI) report.

What does the RBA make of the inflation figures?

The figures do not yet suggest that the inflation problem has been solved. The quarterly rate of change is still clearly too high to be in line with the Reserve Bank of Australia's (RBA) inflation target.

In her first speech, new RBA Governor Michele Bullock emphasised the dual mandate and the need to be more cautious so as not to jeopardise labour market gains. At the same time, however, she indicated that the RBA would react to persistent inflation.

Today's figures suggest that the RBA must now follow these words with action. If the RBA sticks to its cautious stance despite the uncertainties surrounding inflation and continues to wait and see, the Aussie is likely to be punished again.