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SYDNEY - The Reserve Bank of Australia has missed a window of opportunity to stop inflation rising by year's end as the drought pushes food prices higher, an economist says.
The central bank left interest rates unchanged yesterday, as widely expected, providing relief for homebuyers already suffering from six-year-high mortgage rates.
JP Morgan economist Helen Kevans said inflation was low because of the low March consumer price index but food and electricity prices were likely to rise in coming months.
"The Reserve Bank has acknowledged medium-term inflation is building quite substantially," she said. A continuation of the drought would put upward pressure on food prices.
Data released on Tuesday showing weaker than expected retail trade and building approvals data suggested the central bank has time on its hands before having to lift rates again.
However, financial markets are pricing in a high risk of a rate rise before the end of the year.
- AAP
