Reserve Relaxes On Inflation As Policy Bites
The Age
Wednesday April 16, 2008
THE Reserve Bank has grown more relaxed about the inflation outlook, opening the door for it to reverse its interest rate rises. However, that may be some time coming.
Minutes of the Reserve's board meeting on April 1, released yesterday, reveal that it now expects inflation to fall faster than it had forecast in February, which implies that rate cuts too will be back on the table faster than expected.The Reserve board was told that while higher petrol prices are likely to lift annual inflation to 4% when the March quarter figures are released next week, "the current stance of monetary policy is exerting a significant restraining influence on both households and borrowers."Based on current policy settings, inflation . . . would fall by a little more than earlier thought over the next two to three years."In Canberra, Reserve governor Glenn Stevens said yesterday that higher interest rates were working as intended. "Policies are in place, and I think the policies in place will succeed in bringing it (inflation) down over time," he told students at the Australian National University.Market economists are almost convinced that the Reserve has now finished its interest rate rises, so long as future inflation figures deliver no nasty surprises."The RBA is increasingly confident that they have done enough work to restrain domestic demand growth," said ANZ economist Riki Polygenis. "Our view (is) that monetary policy will be on hold for the remainder of 2008, with the possibility of rate cuts some time in 2009."Real estate watcher Residex reported that growth in house prices had slowed to a virtual halt in Melbourne (the median price rose an estimated 0.3% in the March quarter), and is in reverse in Sydney (down 0.15%).
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