RBA lifts inflation forecast

10 Aug 2012, 3:29 pm   -   Source: AAP
Consumer prices are set to rise by 2.5 per cent by December, the Reserve Bank of Australia says (AAP)

Consumer prices are set to rise by 2.5 per cent by December, the Reserve Bank of Australia says (AAP)

Consumer prices are set to rise by 2.5 per cent by December, the central bank says

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The Reserve Bank of Australia (RBA) has nudged up its forecast for the inflation rate by a quarter of a percentage point.

The RBA is forecasting consumer prices are set to rise by 2.5 per cent in the year to December 2012, slightly higher than the 2.25 per cent predicted in May.

Over the next year, prices will rise at the higher end of the RBA's three per cent target range.

In its Statement on Monetary Policy released on Friday, the RBA said the effect of the exchange rate would likely push up the costs of tradeable items as the effect of earlier rises in the exchange rate fade.

The introduction of the carbon price also played a part, but its effect on inflation will wane, it added.

"The carbon price effect on inflation will largely have passed by late 2013 and underlying inflation is forecast to be around the middle of the target range (of two to three per cent) thereafter," the RBA said.

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