The big question is whether the RBA can resist political interference to lift the cash rate in November.
Following the material upside surprise to inflation in the September quarter, almost all economists and investors agree that the Reserve Bank of Australia should lift interest rates in November.But participants worry that a concerted campaign to politically compromise Australia’s central bank may result in the RBA remarkably choosing not to seek to combat its existential inflation crisis.
This week we also received the September monthly CPI , which came out at a stonking 1.3 per cent ex volatiles/travel for Q3. The concern is that there is no evidence of any deceleration in inflation. In fact, the three-month annualised rate of monthly inflation ex volatiles/travel has accelerated to 5.2 per cent, which is the fastest pace since the first quarter of 2023.
“Based on the relationship between the current-quarter forecast miss and the RBA’s inflation outlook over the period from 2010 to 2023, the forecast error in the third quarter would ordinarily see the RBA raise both its year-ahead and year-and-a-half-ahead forecasts for underlying inflation by about 0.2 percentage points.”
“Along with strong services inflation more broadly, these outcomes suggest that domestic demand pressures are still driving domestic inflation.” In an awkward attempt to directly jawbone Bullock, Chalmers asserted that “the Reserve Bank looks for material changes in the inflation outlook – what we’ve seen today, and they will obviously assess these numbers in their own way – but what we’ve seen today is consistent with our expectations, it doesn’t materially change the inflation outlook going forward.”Columnist Terry McCrann claims that Kennedy “all-but announced he will be voting for a pause”.
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