Image courtesy woodleywonderworks on flickr
The odds are building against any change in official interest rates on Melbourne Cup day, the Australian National University RBA Shadow Board has found. The RBA Shadow Board chair Dr Timo Henckel said the recent drop in inflation, and weakness in the global economy, temporarily eases pressure on the Reserve Bank of Australia (RBA) to increase the cash rate from 2.5 per cent. "The drop in headline inflation to 2.3 per cent reduces the pressure for the RBA to lift the cash rate," said Dr Henckel from the ANU Centre for Applied Macroeconomic Analysis (CAMA). "However, the lower inflation rate is largely driven by a fall in electricity prices, following the abolition of the carbon tax in July, and should be interpreted as a once off adjustment to prices as opposed to a sustained fall in inflation. "Furthermore, continued weakness of the Aussie dollar will add inflationary pressures to the domestic economy in the medium run." The RBA Board will hold its November policy meeting on Melbourne Cup day on Tuesday. 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.
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