RBA’s Hauser: Focused on preventing rise in inflation expectations

Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser, speaking in a fireside chat earlier this Tuesday, warned that Australia is facing a difficult macroeconomic backdrop. Elevated inflation and constrained supply capacity raise the risk of a stagflation-style scenario if energy shocks persist, Hauser noted.

Additional Quotes:

Inflation in Australia remains too high, and underlying supply constraints continue to limit the economy’s ability to absorb shocks.
A key concern is the surge in energy prices linked to the Middle East conflict, which is characterized as a significant income shock for Australia.
Higher energy costs are eroding household purchasing power and increasing input costs for businesses, raising questions about how strongly activity may slow in response.
The RBA is focused on preventing any lift in medium-term inflation expectations, which could entrench price pressures and make inflation more persistent.

Market Reaction:

The Australian Dollar (AUD) reacts little to Hauser’s comments, though the hawkish outlook backs the case for a further appreciating move beyond the 0.7100 mark, or a nearly four-week high, touched earlier this Tuesday.