Image courtesy woodleywonderworks on flickr
The case for the Reserve Bank of Australia to increase interest rates is building, although the central bank should leave rates unchanged after its August board meeting, The Australian National University RBA Shadow Board has found. "New inflation and growth data suggest that the RBA's low interest rate setting ought to come to an end soon," said Shadow Board Chair Dr Timo Henckel, from the Centre for Applied Macroeconomic Analysis (CAMA). "Inflation is close to the upper target band, consumer confidence has bounced back from the temporary drop in May and GDP growth remains solid. Although some weakness in the labour market remains, the majority of Shadow Board members are arguing for an interest rate increase in the foreseeable future." The RBA Shadow Board is a project based at CAMA at the ANU Crawford School of Public Policy. It brings together nine of the country's leading experts to look at the economy and make a probabilistic call on interest rates ahead of monthly RBA Board meetings. The RBA Board will hold its August policy meeting on Tuesday. Dr Henckel said the RBA Shadow Board believed there was a 71 per cent probability, down five points since July, that interest rates should remain steady at 2.5 per cent.
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