Economists, like journalists,
have a tendency to hunt as a pack. They’re out there now, trying to
catch an interest rate rise and the fishwrappers are happy to cover it.
It’s just a little unfortunate that we don’t need one.

Rate rise “an even-money bet”, says The Oz. Rate rise fears fuel bond sales, says TheAFR. Inflation figures put rate rise heat on home owners, says The SMH. Only The Age headline writer seems to be out of step – “RBA expected to hold rates in May”, but the copy still has a bet each way.

The
pack is being led by Macquarie’s Rory Robertson, the “chicken slapper”
with about the best record on forecasting monetary policy, including
spectacular success tipping the Fed during his time in New York.
Robertson moved to a 50/50 stance on a rate rise after believing we
were safe for sometime yet.

But the pack seems to be
underestimating the RBA’s concern for the economy overall and not just
headline inflation figures. The Martin Place mandarins have been wisely
treating the four-year rally in oil prices more as an economic dampener
than an inflation fuse – and they’ve been right.

Yesterday’s CPI
figures were more of the same. Take out the food and fuel and the sky
isn’t falling. Yes, things are a bit heated in the mining and
construction sector of the economy with plenty of inflation there, but
the rest of nation is nothing to get excited about.

It makes
good, scary headlines – the very best kind – to threaten interest rate
hikes, but it would be a wild and dangerous Reserve Bank that lifts
rates any time soon on the available evidence. Just ask RBA board
member Roger Corbett.

Peter Fray

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