Latest CPI data will put pressure on rates - economist
12:39, Wednesday, 23 April 2008
Sydney - Wednesday - April 23: (RWE Aust Business News) -
Australia's CPI soared 1.3 per cent in the March quarter according to the
latest figures from the Australian Bureau of Statistics, lifting the
annual rate of inflation to 4.3pc.
And it will put pressure on the Reserve Bank board to lift rates
again when it deliberates next month on interest rate policy.
But it wasn't all bad news, one economist said.
"The fall in consumer spending early this year has finally seen
retailers passing on the benefits of the higher Australian dollar,"
CommSec equities economist Savanth Sebastian said.
"The Australian dollar has lifted almost 16 per cent over the
last year yet, suggesting cheaper imported goods yet the evidence until
the start of 2008 suggested otherwise.
"The latest data has seen falls in the price of clothing,
footwear and furniture.
"It seems the retailers are finally cutting prices and reducing
margins in an attempt to keep consumers spending."
But he said, in an environment characterised by a tight job
market, strong domestic and globally soaring food prices, the Reserve
Bank can't afford to take chances.
"Inflation is now solidly pegged well above the top end of 3 per
cent target band for the remainder of this year, and the Reserve Bank
would be justifiably worried about inflation," he said.
"There's no doubt that the central bank has tightened monetary
policy significantly in recent times and due to the lag effect most of
that tightening is yet to come to fruition.
"Yet inflationary expectations remain the key driver of inflation
remaining at these elevated levels.
"And a rate hike next month should be basically seen as an
insurance policy that will ensure inflation begins to work its way
lower."
ENDS
Cheers markco2
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