Whither interest rates? This is the question du jour, and Tim Colebatch has asked a good supplementary for The Age.
“Why does Australia have some of the Western world’s highest interest rates — yet a growth rate that is very average? And why might interest rates soon go higher still?”
One answer is the run of strong recent economic data. A second involves opportunity — the RBA’s chief economist, Malcolm Edey, who stimulated this article, has said rate setting is a “month-by-month” proposition, rather than waiting for the quarterly CPI data, as inferred last year.
However, the policy called “jawboning” is probably also important: “… the Reserve tends to use words as a warning when it wants to avoid anything stronger”.
Gentle readers will note that the Aussie dollar has hit 80 US cents, and the price of oil has again been falling. These will help contain inflation, and lots of people, not least members of the gummint, will be hoping for more of the same.
Read more at Henry Thornton.
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