RBA’s Hunter: Risk of inflation expectations rising is elevated

Reserve Bank of Australia (RBA) Assistant Governor Sarah Hunter said that the central bank is worried higher energy costs will feed through to consumer prices quickly given the stretched state of the domestic economy, potentially creating a ‌significant shift in inflation expectations, Reuters reported on Tuesday.

Key quotes

Expect companies to swiftly transfer increased oil costs. 

Some firms plan to raise retail prices, especially in construction. 

Our findings indicate pass-through will be quicker and more widespread. 

Forecasts assume gulf crisis resolves soon. 

Risk of inflation expectations rising is elevated. 

Recent increase in oil prices is especially difficult to manage. 

Shock emerges amid high capacity limits, domestic cost pressures. 

Middle East conflict is a clear outside shock. 

Inflation risk seen on both upside and downside. 

Market reaction 

At the time of writing, the AUD/USD pair is trading 0.27% higher on the day to trade at 0.7168.