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Inflation dip cools rate hike rumour

The RBA’s decision to increase the official cash rate seems to have had the desired effect on inflationary expectations.

According to the Melbourne Institute Survey of Consumer Inflationary Expectations, the median expected inflation rate has decreased to 3.1 per cent from 3.8 per cent in October.

“The Reserve Bank Board’s announcement of a rate hike on 2 November and the Australian dollar reaching parity against the US dollar, appear to have reigned in inflationary expectations,” Melbourne Institute research fellow Dr. Michael Chua said.

“While this month’s fall is not surprising, we are still expecting inflationary pressure to build up in the next 12 months. The dip in inflationary expectations may possibly delay a further rate hike in December 2010.”

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