Wednesday, 28 October 2009

Real interest rates return

The Reserve Bank aims to keep inflation in Australia between two and three percent and while the consumer price index figures out today show a rise of just 1.3% over the last year all the news is not good.
The Bank’s economic boffins are always trying to predict the future trend rather than concentrate on the past record and their own measures to help them do just that  — the weighted median and the trimmed mean  — are both still above the three percent level.
That, I fear, will encourage the Bank’s board to sneak official interest rates up once again. The good news is that, while still high, both the Bank’s measures are on the way down which suggests to me that there might not be as many future increases as most in the financial market have been predicting.

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