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Watcher McCrann Thinks Q2 CPI Enough For August Pause

RBA

RBA watcher and journalist for The Australian Terry McCrann believes that today’s Q2 CPI is enough for the RBA to stay on hold as he thinks Governor Lowe and Deputy Governor Bullock “would be hugely chuffed” with today’s data.

  • He points out that the 0.8% q/q rise is consistent with 3.2% annualised inflation, close to target. McCrann thinks that the CPI may even get “close” to target this year without unemployment rising to 4.5%. He says “There is no way that the RBA would hike in the wake of this sort of data – even after the very strong jobs numbers of last week.”
  • McCrann thinks that going forward wages and productivity are the key and there is a risk of further tightening given that the government is pushing 4-5% wage increases which aren’t consistent with the inflation target at these levels of productivity. He also believes that the government’s “anti-productivity, anti-business agenda” is a risk. Q2 WPI is released on August 15 and Q3 on November 15 (includes the July 1 wage increases).
  • He finishes with “these inflation numbers emphatically endorse Lowe taking a victory lap.”
    - The Australian
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