Speculation is growing that there may be an interest rate rise on Melbourne Cup day, with the Reserve Bank's governor warning of potential inflation risks.
There’s nothing the media likes more than an interest rate rise on Melbourne Cup day. It’s surprising how often it’s happened, and many in the financial markets have convinced themselves that’s what we’ll get next Tuesday. And the good news is that, despite the radical reform of moving to a mere eight board meetings a year, the Reserve Bank has ensured that meetings on cup day will continue.
Any new governor would have said the same in their first speech. Trouble is, her tough statement about not being willing to return to the 2 to 3 per cent inflation target “more slowly than currently forecast” came just the day before publication of the consumer price index for the September quarter. So I think the case for yet another rate rise is weak. As Bullock clearly demonstrated elsewhere in her speech, the Reserve’s single, crude instrument, raising interest rates, delivers most of its punishment to the quarter or so of households withToo many of these people are really hurting, and the full hurt from rate rises already made has yet to be felt. The economy is slowing, consumer spending is hardly growing, real income per person is falling.
Ah, says the Reserve, the reason we can’t wait too long to get inflation back to target is that, the longer we leave it, the greater the risk that business’ and workers’ expected rate of inflation rises above the target range.
Interest Rate Melbourne Cup Day Reserve Bank Inflation Risks Speculation
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