Economic data puts rates on hold

Economic data released over the last couple of days shows that while the effects of Asia continue to be absorbed into the Australian economy, the overall impact is not as great as some analysts have expected.

The Consumer Price Index figures were released on Wednesday, showing that inflation for the June Quarter rose by 0.4 per cent and 1.6 per cent for the past year. This is well within the range of 2-3 per cent, which the reserve bank deems as “acceptable”. Complimenting these figures were the Average Weekly Ordinary Time Earnings (AWOTE), which were released on Thursday. Earnings grew by 4.1% in the year to May, which is also below the Reserve Bank’s target of 4.5 per cent.

In addition to inflationary figures, the Westpac/Melbourne Institute (which measures economic growth), fell from 5.2 per cent in the year to April, to 5.1 per cent in the year to May. While the index has taken a slight fall, it still indicates strong domestic economic growth.

The result for interest rates would appear to knock on the head any speculation for a rate rise. If anything it points to the Reserve Bank easing monetary policy. However, it is most likely that rates will remain on hold, especially given the recent weakness in the $A, and the possibility of cheap Asian imports pushing up inflation.

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