Where's the inflation?

The Reserve Bank of Australia (RBA) continues to be perplexed by the lack of consumer price inflation (CPI) in Australia, citing it as one of the reasons it has held the overnight cash rate at 1.5% since August 2016, the lowest level ever. In its most recent Statement, it cited low inflation and growth as the reasons for doing so [emphasis ours]:

The low level of interest rates is continuing to support the Australian economy. Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

The RBA believes that a low cash rate will eventually lead to highe …

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About the author

Dr Justin Pyvis is the Founder and Chief Economist at Pixelics. Justin is a published academic who has previously worked at AECOM, a global consultancy on the Fortune 500 and more recently with Asianomics Group, an economic, corporate and technical analysis research company based in Hong Kong.