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
