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Low inflation eases rate hike concern

By webmaster 28 October 2010 | 1 minute read

Surprisingly low inflation has quelled concerns that the RBA may lift rates next week.

According to the Australian Bureau of Statistics, underlying inflation for the year to September eased to a five year low of 2.4 per cent – dropping to the bottom half of the RBA’s 2 to 3 per cent target band.

Yellow Brick Road’s executive chairman Mark Bouris said the results would leave the majors, who have been posturing about out of cycle rate hikes for some time, between a rock and a hard place.

“With inflation figures coming in a little lower than predicted, there’s less likelihood of the RBA raising rates when it meets next week.  This will leave the major banks in a difficult position as they have been signalling an out of cycle rate rise for some time, despite increasing political pressure not to do so.  Clearly there will be major political ramifications if they move outside the RBA cycle,” Mr Bouris said.

Earlier this month both CBA’s Ralph Norris and Westpac’s Gail Kelly said out of cycle rate hikes were almost “inevitable”.




Inflation determines the decline of purchasing power for a given currency over time, as well as the general level of price for goods and services.

Low inflation eases rate hike concern
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