Wednesday, July 26, 2006

Higher interest rates imminent

The strong CPI increase in the June quarter of 4% annual (and the CPI increases of around 3% for the previous 3 quarters) are the highest inflation rates for the last few years. This moves the RBA out of its inflation 'comfort zone' of 2-3% and, coupled with the employment of an extra 52,000 Australians during the June quarter, makes it very likely that official interest rates will adjust upwards from 5.75 to 6% at the August RBA Board meeting.


Bring Back EP at LP said...

agreed, the core rate posted on the RBA website makes that a certainty.

Steve Edney said...

The SFE IB futures market (bets on the overnight rate) is trading at a rate implying a 98-99% chance this morning, but then they had it at over 80% before the announcement.

Bring Back EP at LP said...

it is saying a 91% probability of another one after this.

given the RBA's core measure I would have to say a 50 point hike isn't out of the question.
The trend in the RBA's core rate is quite alarming