Australia’s inflation breakout is not as severe as across much of the world. The Reserve Bank must now focus much more sharply on ensuring that it doesn’t become so.
Australia’s central bank has painted itself into a nasty corner by getting behind the curve on containing the global inflation spike and needing to increase official interest rates in the middle of an election campaign to prevent further erosion of its monetary policy credibility.revealed on Wednesday means that not lifting its extraordinarily low 0.
The political challenge was intensified by then-shadow treasurer Wayne Swan’s claim that the RBA had allowed the inflation genie to get out of the bottle, and certainly above the official 2 per cent to 3 per cent inflation target. It’s got itself to blame for leaving it too late to start normalising its ultra-cheap money stance, which was appropriate for the depth of the COVID-19 crisis. RBA governor Philip Lowe’s forward guidance that rates would
The awkwardness of raising interest rates for the first time since 2010 during the election campaign could have been avoided if one or two modest basis point increases had already been banked this year, as theurged. Instead, the Morrison government’s $12 billion vote-buying cost of living package now adds to the risk that the delay in raising rates means they will end up having to go higher.
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