OPINION: The central bank should pause and look at the lagging data. But it is unlikely to find evidence of an inflation problem from another era.
The Reserve Bank board should pause cash rate rises at its December meeting. After the second-most aggressive tightening in its history, the Reserve Bank should take the time to assess the lagged effects of its restrictive policy and reassess in February.
The latest wages data confirms real wages are continuing to go backwards. So where is the evidence of the dreaded wage-price spiral?When asked what he’d like for his birthday, a comedian in the 1980s replied: “Nuclear war – so as to remove the threat of it.” Sometimes it feels as though doctrinaire monetarists are hoping for evidence of a wage-price spiral so they can remove the threat of it by slamming the economy into recession.
Rather than experiencing a 1980s wage-price spiral, Gerwin Bell has suggested the world might be undergoing an inflationary episode Do global central bankers ever engage in self-reflection? What if they are misdiagnosing the current inflationary bout?
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