Inflation 'rebirth' threatens central banks' low rates for longer plans

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The Reserve Bank is holding the line on low interest rates for years to come, but some economists warn the risks of an inflation 'rebirth' are rising, an issue the US central bank will be discussing this week.

Official consumer inflation in Australia was running at just 1.1 per cent over the year to March.

Reiterating its earlier commitment to keep the cash rate near zero until "at least" 2024 to attain full employment to boost wages growth and thereby increase inflation, the minutes noted that "monetary policy will need to remain highly accommodative for some time yet". While the US Federal Reserve has described rising inflation as "transitory", economists are looking for signs of sustained inflation that might force rate rises sooner than central banks currently expect.Capital Economics chief economist Neil Shearing said the larger-than-expected rebound in US inflation carried signs of more sustained price increases that could lead to an eventual overheating of the US economy.

 

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