The Reserve Bank of Australia will likely be forced to warn that it could raise rates again.
demonstrating that central banks are repeating past mistakes by actively encouraging an acceleration in consumer price pressures through their dovish prognostications. Australia’s central bank could be forced to fall into line with
What was even more distressing is that the official statistician’s new monthly inflation gauge implies that core inflation is likely to remain elevated in the June quarter, pointing to another rapid increase of 0.9 per cent or more. Put differently, inflation is all but certain to stay hot for the foreseeable future.
If Martin Place is intellectually honest, which, to be clear, is never a sure thing, the March quarter inflation shock should result in a mechanical upgrade to its inflation forecasts such that it would not be able to realistically secure its 2.5 per cent target until late 2026. This is an absurdly long time and further undermines its already embattled inflation fighting credibility.
“If the RBA truly has a ‘low tolerance’ for inflation taking longer than is currently forecast to return to band, then they should hike 18 months before this period is realised – this would be a hike at the May or June meetings.”Of course, it would be an enormous surprise to markets if the RBA actually did what it should do, which is precisely why its credibility is shot. The added complication here is that the RBA has set its 4.35 per cent policy rate way below the 5.0 to 5.
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