“Even though most macro-economic indicators are running uncomfortably hot, the fact that December Quarter inflation was lower than expected means that Australians will not have to face another rate hike before the 2007 Federal Election.”
Those are the words Messrs Howard and Costello would have loved to hear emanate from the Assistant Governor of the Reserve Bank, Dr Malcolm Edey’s mouth when he spoke to the Australia & Japan Economic Outlook Conference 2007 on Friday. Instead, they got the opposite.
Edey made it clear that the RBA continues to be on a heightened state of awareness on inflation, stating that “the recent round of data has pointed to relatively strong outcomes for demand, output and wages growth in the December quarter. As always, the Bank will be giving careful consideration to these developments, along with other incoming data, as it continues to review inflation prospects month by month.”
This is an important point — the next two official inflation reports are due on 24 April and 25 July, quarterly, not monthly. Therefore, even though the most recent CPI data was benign, the fact that every other major macro-economic indicator (ie. jobs, wages, and household spending) is running hot could be enough to spark another hike.
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