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RBA’s Confidence in Slaying Disinflation Doubted by Bond Market

  • Swaps indicate traders expect inflation will hold below 2%
  • Current policy is consistent with inflation goal, RBA says
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Australian fixed-income investors are showing skepticism that the inflation rate will rise back to the central bank’s target range without more cuts to benchmark borrowing costs.

Traders of inflation swaps have been betting since before this month’s policy meeting that the pace of consumer-price gains will hold below the Reserve Bank of Australia’s preferred band of 2 percent to 3 percent over the next five years. That contrasts with the RBA’s view that its decision to keep the cash rate unchanged at 1.75 percent was consistent with the pace of inflation moving back to target “over time.”