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It will now take longer for inflation to return to the targetAnd this is no longer an acceptable outcomeWe cannot allow inflation to get away from us againThe pickup in inflation is not down to just one factorIt is due to a combination of factors across a broad range of components and sectorsRight from the get go, we’re seeing Bullock shift the narrative to basically say “inflation is a problem” now. And that effectively puts to bed any thoughts about two-sided risks or reversing back to the easing part of the cycle again. The outlook picture that she is painting is one that the RBA has to deal with higher price pressures more than anything else moving forward.Her remarks from the Q&A session:We felt it was necessary today to make an adjustmentWill continuously monitor and update forecasts based on data developmentsCurrent forecast/projection is based on the view that some factors driving up inflation is temporaryNot making any predictions, not giving any forward guidance; to remain focused on the dataNo discussion about a 50 bps rate hikeA reminder that forecasts the further out you go, becomes more and more uncertainNo particular path in mind on the cash rateAnd we’re going to monitor and wait, as we did when rates were on the way downWe think there’s some temporary drivers to inflation and hopefully it will come down, so that will helpI think we were doing the right thing last year but circumstances changeThe point highlighted in bold is something to be wary of. Their current view is that if the factors driving up inflation is temporary, they can adopt a slower approach to hiking the cash rate through to 2027. The indirect meaning of that is if the underlying factors appear to be stronger than anticipated, then they would have to move quicker instead. So, just be wary of that.
This article was written by Justin Low at investinglive.com.
💡 DMK Insight
Inflation’s stubborn persistence is a wake-up call for traders—here’s why it matters now: The recent commentary suggests that inflation won’t return to target levels anytime soon, which could lead to prolonged volatility in both the forex and crypto markets. Traders should keep an eye on central bank responses, as any hawkish stance could strengthen the dollar and pressure risk assets like cryptocurrencies. A multi-faceted inflationary environment means that traders need to be agile, adjusting their strategies based on economic indicators and central bank signals. For instance, if inflation continues to rise, we might see interest rates increase, which historically leads to a stronger dollar and weaker performance in equities and crypto. But here’s the flip side: if inflation is driven by supply chain issues or other temporary factors, we could see a quick reversal, creating opportunities for short-term trades. Watch for key economic reports, especially CPI and PPI data, as these will provide insight into inflation trends. Also, keep an eye on the 1.05 level for the euro against the dollar; a break below could signal further dollar strength, impacting risk assets significantly.
📮 Takeaway
Monitor inflation reports closely; a sustained rise could strengthen the dollar and pressure crypto, especially if the euro breaks below 1.05.
