So, the RBA just lifted the cash rate 25bp in a board decision that was unanimous.
The reversal from the rate cut just last August matches the span of the Bank’s about-face after the GFC in 2009. Then, the cash rate had been taken to “zero” amid a global crisis.
No crisis this time, just a series of unfortunate events – inflation accelerating because of too much government spending, shocking productivity and a failed experiment by the RBA to see how low the jobless rate can go without boosting inflation.
Well, now we know.
Inflation accelerated for headline and trimmed mean and for goods and services. It’s broad-based and persistent. Annual inflation is fast approaching 4% - up significantly from the annual rate in Q3 and moving further away from the RBA’s 2-3% target range.
Confirmation today that annual inflation is accelerating on every main measure pretty much locks in an RBA rate hike - it may or may not come next week (markets now price better than a two in three chance of +25bp), but it’s coming. Probably more than one hike, too.
So, Australia’s economy generated 65,200 jobs last month (in net terms), pushing the jobless rate down to an eight-month low. On paper, that’s great news.
But the leading indicators all point the other way. One thing is sure – further interest rate cuts are off the table.