Investors will be looking for clues on the Reserve Bank’s moves on interest rates in response to inflation when the deputy governor, Andrew Hauser, speaks tonight.Investors will be looking for clues on the Reserve Bank’s moves on interest rates in response to inflation when the deputy governor, Andrew Hauser, speaks tonight.
Anyway, the return of a headline consumer price index with a 4 in front of it for the first time since November – when the RBA last lifted the cash rate – certainly stirred markets, the media and those in Canberra. An early federal election called on the premise of falling mortgage costs, in other words, seems ruled out for now.
“The mix of slow growth and gradual progress on inflation reflects the RBA’s decision to embrace a ‘lower for longer’ approach – a lower rate peak compared to other advanced economies, resulting in a longer period at that peak,” Alan Oster, NAB’s chief economist, said in a note. Ellis sees no need to shift Westpac’s forecasts just yet – not least because her team correctly picked the 4% May inflation result, compared with the market’s consensus view of 3.8%.
And as Westpac noted on Thursday, “the monthly indicator only includes price updates for around 60% of the inflation basket and should be interpreted with caution”.