Australia Price Risk Seen in 20% Tomato Jump as RBA Forced to Extend Pause

From Bloomberg:

Reserve Bank of Australia Governor Glenn Stevens can glimpse the inflation threat he faces from the nation’s floods at the produce shop near his suburban Sydney home in Sylvania Waters.

Tomato prices soared 20 percent in the past week and bananas, grapes and sweet potatoes are up 10 percent, said Maurice Sorace, owner of Sylvania Best Fresh, who gets about a third of his fruit and vegetables from flood-ravaged Queensland state. “Prices will be higher in the next week” as the deluge drowns more crops and clogs roads, he said.

The crisis may force the RBA to accept higher inflation in coming months as the floods spur food and commodity costs and slow growth in a disaster zone the size of Egypt. A gauge of inflation in the bond market showed the expected rate surpassing the RBA’s target as the damage, along with future rebuilding in a country already near full employment, risked stoking prices....read on