OPINION: CPI numbers have confirmed that we are getting just as much inflation as other similar economies, if not a bit more.
Finally, the combination of the above has meant that the RBA board has had the very real possibility of a sharp global downturn doing some of the heavy lifting on slowing the domestic economy in 2023.
To be sure, a mild disinflation, consistent with “peak” headline inflation, is coming out of the global economy. The original “pandemic inflation shock” is now receding. But this will do little to slow an economy now producing 5 per cent to 6 per cent domestic inflation. These are the key factors that motivated the RBA’s pivot to 25bp hikes in October, well before other central banks began to lift their feet off the brakes.
The RBA still has a long way to go on this metric. Our short-term real interest rate was -3.8 per cent in December. Even if core inflation pulls back to 5 per cent as it has done in the US, we are still sitting on a negative real rate of almost 2 per cent.
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