RBA Sees Inflation Above Target Until 2027: May Minutes

2026-05-19 02:17 By Farida Husna 1 min. read

Policymakers in Australia remained concerned about persistently high inflation, which had already been running well above target before the Middle East conflict began, minutes from the Reserve Bank's May meeting showed.

The war’s impact on fuel costs further clouded the outlook, lifting headline inflation in March and likely again in the June quarter.

Staff projected underlying inflation above 3% until late 2027, returning to the midpoint only by mid-2028.

Board members weighed a 25bp hike against holding steady.

Arguments for tightening stressed strong capacity pressures, and that financial conditions were “not sufficiently restrictive”.

Concerns also centered on inflation expectations becoming “de-anchored” if elevated prices persisted.

The case for pausing pointed to risks that conditions were already tight and that prolonged conflict could sap growth and labor demand.

Most members judged inflation risks had risen, concluding the 4.1% cash rate might not be enough to contain them.



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RBA Sees Inflation Above Target Until 2027: May Minutes
Policymakers in Australia remained concerned about persistently high inflation, which had already been running well above target before the Middle East conflict began, minutes from the Reserve Bank's May meeting showed. The war’s impact on fuel costs further clouded the outlook, lifting headline inflation in March and likely again in the June quarter. Staff projected underlying inflation above 3% until late 2027, returning to the midpoint only by mid-2028. Board members weighed a 25bp hike against holding steady. Arguments for tightening stressed strong capacity pressures, and that financial conditions were “not sufficiently restrictive”. Concerns also centered on inflation expectations becoming “de-anchored” if elevated prices persisted. The case for pausing pointed to risks that conditions were already tight and that prolonged conflict could sap growth and labor demand. Most members judged inflation risks had risen, concluding the 4.1% cash rate might not be enough to contain them.
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