Inflation is still expected to return to the Reserve Bank of Australia's target band by the end of 2025, after proving to be more persistent than expected.
Inflation is still expected to return to the Reserve Bank's target band by the end of 2025 but it is proving more persistent than hoped.Â
The central bank has released an updated set of forecasts in its November quarterly Statement on Monetary Policy (SOMP), as well as further details of its decision to lift interest rates earlier in the week.
The board considered both an extension of its four-month hold as well as a hike at the November meeting but ultimately decided the "risk of inflation remaining higher for longer has increased".
Based on up-to-date forecasts, the consumer price index is expected to be back within the two to three per cent target range at 2.9 per cent by December 2025, a touch above the 2.8 per cent rate predicted in August.
Though mid 2025, it's still expected to be 3.3 per cent, above the 3.1 per cent previously forecast.
The new predictions were put together ahead of Tuesday's board meeting and assumed further increases to the cash rate in line with financial market pricing and economists' expectations.Â
There were also several other risks to the inflation outlook worrying board members, including potential global energy market disruptions and higher food prices related to El Niño.
The case for a pause was driven by signs of still-anchored inflation expectations, as well as signs of an easing labour market and below-trend growth.
"A further pause could also allow further time to consider how the evolving situation in the Middle East will affect the outlook for global activity and energy prices," the statement said.