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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Sep 03 2015

Should the Reserve Bank of Australia be Worried?

The Reserve Bank of Australia (RBA) kept its policy rate at a record low of 2% earlier this week, maintaining that economic conditions still require accommodative monetary policy. In fact, Q2 GDP growth came in at a mere 0.2% quarter-over-quarter, just half the pace widely expected and well below the previous quarter’s pace. Despite the disappointing data, Australian Federal Treasurer Joe Hockey sees no reason to worry, declaring that “[o]ur economic plan is being implemented and it is working.”  But with the economy still facing headwinds from weak investment and low commodity prices, and inflation staying below the RBA’s comfort zone, can the RBA continue to keep rates unchanged?
In our latest update to the Australian Future Inflation Gauge, the value of which lies in its ability to anticipate cyclical swings in Australian inflation, we clarify the outlook for Australian inflation, providing insight into its future trajectory.

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