Low inflation figure unlikely to affect rate decision
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19/01/2010 12:00:00 AM
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The official inflation rate is scheduled to be released next week, but despite early predictions of a relatively "benign" figure it is believed the Reserve Bank of Australia will continue to raise rates.
The TC Securities-Melbourne Institute inflation gauge, which uses the same methodology as the Bureau of Statistics index and is usually accurate to five one-hundreths of 1%, estimates that the December quarter CPI will come in at 0.1% and 1.7% for the year to December, reported the SMH.
But La Trobe University professor Don Harding, who compiled the results for the institute, told the SMH he believes the RBA will look at the figure and ignore it.
"The board will look at it, see there's not much inflation in the system say that's nice to know, but then say the labour market is getting tight, retail sales are looking strong, any number of indicators are looking strong and we probably think inflation is about to pick up."
The official annual inflation rate for the September quarter was 1.3%. A rise to 1.7% in the December quarter would still be below the Reserve's 2-3% target.
However, some economists predict the RBA will look at the figure and say that inflation has now since bottomed out, indicating that pressure is once again building.
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Big banks tip interest rate rises on horizon - Increased competition for deposits and higher funding costs could force big banks to raise rates out of step with RBA movements
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