It’s (almost) official – the Reserve Bank “is still undecided as to whether it will lift interest rates next week, according to one of the world’s most prominant global economists”.
This is the line being peddled by said economist, David Hale. The story was told on Lateline last night, according to Turi (sic) Condon on p.2 of The Oz today. Henry wonders what it takes to get a briefing from the RBA. We offer ourself as “one of the world’s most prominent virtual economists”, and we promise not to spill the beans on Lateline. (Memo RBA: contact Henry here.)
Of course, the Reserve Bank board meets next week, and our advice to the board will be available here and in the Oz on the morning of the relevant meeting. (Previous advice may be accessed here.)
However, without the benefit of an exclusive briefing, we can confidently assert that there are at least two views in the Reserve. The natural conservative view is to do nothing if at all possible – no doubt the view of Governor Glenn Stevens.
Then there is the view of Chief Economist Malcolm Edey, who recently spoke in more radical terms – let’s make sure inflation is properly under control.
Henry guesses (not having been listening at drainpipes), that Deputy Governor Ric Battellino will be a hawk. This is his natural bent, and conforms to the traditional role for the Deputy Governor, especially one whose age makes it likely he will never be Governor.
The RBA’s “Stability report” certainly shows an institution not too worried about most things within its purview. “The Reserve Bank of Australia (RBA) said it currently sees few risks to financial stability with the level of problem loans quite low and households adopting a cautious approach to their finances. The RBA pointed out that although there were a proportion of households under pressure, especially those that took out loans with high loan-to-valuation ratios in 2003 and 2004, but the overall picture remains quite reassuring”.
In the past week, the price of oil has lurched upwards by around US$5, and this will be used both by hawks and doves – the hawks because price rises will increase oil price inflation and at some stage this will spill into other prices (including wages) and the doves because higher fuel prices will dampen household and business spending globally.
And the doves will also point to weaker economic news from the US economy and rises in the value of the Aussie dollar. Watch this space next Tuesday.
Read more at Henry Thornton.