- The interest rate increase will help contain inflationary shock
- If second round effects feed through to expectations, then it could require even higher rates
- The cash rate level is now a bit restrictive
- That gives us space to see how the conflict plays out
Q&A session:
- “Wait and watch” is probably the wrong term to describe current stance
- We feel we are now in a position where we’ve got space to be alert to both sides of the risks to inflation outlook
- The war has delivered a shock to income, “it has made us all feel poorer”
- Baseline scenario outlines that growth will be anaemic but economy will still grow
- Quite possible we didn’t have to raise cash rate again if the war didn’t occur, but reality is that it did
- The war has made the tradeoff much, much worse; we have to be cognizant of its impact on inflation expectations
- Reasonable for businesses passing on costs to consumers
- We want to guard against inflation pressures being embedded into the economy
More to come..
This article was written by Justin Low at investinglive.com.
