A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

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Aug 01 2013

Chinese Slowdown May Force RBA to Cut Rates Again

ECRI has just updated its Australian Future Inflation Gauge (AUFIG). The value of this forward-looking gauge lies in its ability to predict cyclical turns in Australian inflation.

With the slowdown in China, Australia’s top export destination, hurting the Australian economy, the Reserve Bank of Australia (RBA) is expected to cut rates next week as Australian inflation remained in the RBA’s target band in the second quarter. Having already reduced rates to a record low, the question remains: how much more accommodation will the inflation rate allow?

The latest update to the AUFIG clarifies the future trajectory of Australian inflation, indicating whether the RBA will have room for further rate cuts in the coming months.

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