Money Australia inflation to stay low for some time, limit case for rate rise - RBA

12:07  17 april  2018
12:07  17 april  2018 Source:   Reuters

Here's what economists are saying about Australia's inflation report

  Here's what economists are saying about Australia's inflation report Annual underlying consumer price inflation (CPI) in Australia now stands at 2%, a two-year high. It's currently rising faster than the RBA is expecting. Economists don't think it will be enough to see the RBA lift interest rates in the near-term.While remaining weak from a historic perspective, it looks like Australian inflationary pressures are slowly starting to build.According to the ABS, underlying consumer price inflation (CPI) rose by 0.52% in the March quarter, seeing the annual rate lift to a more than two-year high of 1.98%.That's hotter than the 1.85% level expected by economists, and also well above the 1.

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“I expect rising inflation pressures will figure more prominently in discussions of the global economy than they have for some time ,” he said. The RBA remains concerned about the level of household debt in Australia , but Dr Lowe said there had been “ some containment of the build-up of risk” in this

Reserve Bank of Australia Governor, Philip Lowe.© AAP Image/Ben Rushton Reserve Bank of Australia Governor, Philip Lowe. Australia's central bank saw scant reason to raise interest rates this month given inflation remained below target and likely to remain subdued in the face of sluggish wage growth.

Minutes of the Reserve Bank of Australia's (RBA) April meeting showed its Board agreed the next move in rates was more likely to be up than down, assuming the economy gathered momentum as expected.

Yet, the Board also saw "no strong case" for a move in the near term, even as it notched up the longest period without a change in modern history.

The last move was a cut to 1.5 percent in August 2016, and financial markets are wagering this steady spell could last well into 2019.

The Australian dollar is getting dumped, falling to the lowest level seen this year

  The Australian dollar is getting dumped, falling to the lowest level seen this year The Australian dollar remains under pressures against the greenback, falling to its lowest level since December 2017. Higher US bond yields continue to support the greenback.

Key points. > The RBA eased this month because actual inflation has fallen below target and is likely to stay there for a while. And the Reserve Bank of Australia ’s latest rate cut has some fearing that it’s going down the same “failed path” as other major central banks.

The Australian dollar is slightly higher after the Reserve Bank of Australia opted to leave interest rates at 1.50%. The main story is that the statement shifted its tone on inflation . The previous statement said: "In underlying terms, inflation is likely to remain low for some time

Crucially, wage growth and inflation has undershot expectations for some years and showed little sign of heating up soon.

"Low growth in labour costs in combination with strong competition in the retail sector suggested that inflation would remain low for some time," the minutes showed.

The bank had said exactly the same thing this time last year, underlining the lack of improvement.

There was also a note of caution in the Board's outlook, noting only that the economy "looked likely" to record faster growth in 2018 after a somewhat disappointing 2.4 percent outcome last year.

The labour market remained a bright spot with employment booming over the past year or so and leading indicators pointing to further gains ahead.

Yet unemployment had stayed stubbornly stuck around 5.5 percent and levels of underemployment were relatively high, a factor weighing on wage growth.

That, in turn, had restrained consumer incomes and spending power, particularly given record levels of household debt.

Profits versus popularity - the dilemma for banks .
Banks will come under pressure to raise interest rates as their costs rise.It comes down to a choice of profits versus popularity.

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