OPINION: Wednesday’s inflation data could decide if the RBA keeps interest rates on hold next week. But central bankers and investors should look beyond one quarter’s numbers.
There’s plenty riding on the inflation numbers that will be released on Wednesday, given it’s the last major piece of data we’ll get before the Reserve Bank announces its next interest rate decision on May 2.
On Monday night in the US, The Coca-Cola Company delivered a set of March quarter numbers that showed what central banks are up against in the short term. While Cokeit’s the way it did this that matters; while volume rose only 3 per cent on the prior year, total organic revenue rose 12 per cent as the group lifted prices by 11 per cent.
These examples neatly illustrate the conundrum facing the RBA. While inflation around the world has peaked, it’s not yet clear how quickly it will come back towards central bank targets. Demand remains robust, consumers keep spending and companies are easily defending profit margins.The fact the RBA paused in April shows it is wary of hiking in the face of a slowing economy.
, which could eventually cost US taxpayers $US1 trillion, is causing a scramble for labour and materials. US efforts to reshore computer chip manufacturing and other critical industries is similarly inflationary; Larry Fink, co-founder of investment giant BlackRock has argued this reshoring push will mean inflation in the US doesn’t go below 4 per cent “anytime soon”.
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