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Australian Reserve Bank Outlook for Australia – evidence of stagflation?

Posted in Australian Reserve Bank by Aussie on April 19, 2011

I just noted this article relating to the expectations of the Board of the Australian Reserve Bank. The Board meets monthly to consider the need for corrective action for interest rates. At the moment the rates are holding but that is not always the case –  interest rates had risen considerably over the past two years, but at least not as far as in the 1970s and 1980s when they soared.

DISASTERS in Japan and Queensland have not changed the medium-term economic and inflationary outlook for Australia, the central bank says.

The minutes of the Reserve Bank of Australia’s (RBA) April 5 board meeting said while these disasters created some uncertainty, strong economic growth in Asia, rising oil prices and European sovereign problems were also creating uncertainties over the recovery in parts of the global economy and putting pressure on inflation.

The board kept the cash rate on hold at 4.75 per cent at that meeting after last raising in November, citing rising commodity prices as the main reason for that move, and said in the latest minutes that it saw no case to move interest rates in April.

The central bank uses its control over the interest rate to keep inflation between two to three per cent on average over the course of the economic cycle.

This is probably the thing that we need to watch in the near future:

The RBA board is expecting inflation for the March quarter to be quite high while economic growth would be lower than previously thought due to some lost coal production and delays in resuming mining operations after the Queensland floods.

Read more: http://www.news.com.au/business/breaking-news/reserve-bank-outlook-for-rates-inflation-unchanged/story-e6frfkur-1226041479550#ixzz1JwqB6kLs

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