Although the pressure from pandemic disruptions is beginning to ease, some costs will remain permanently higher, says EY chief economist Jo Masters.
, which means once the price has been pushed higher, they are less likely to come down.
About a quarter of products identified by EY as experiencing faster than normal price growth over the past 12 months fall into the “sticky-down” category, as well as the non-discretionary CPI basket, which means the passing of the pandemic may not mean the passing of the hip-pocket hit. “A large number of the items driving the rise in inflation lately are items that are sticky-down and therefore unlikely to have a deflationary contribution, even once supply chain issues are resolved.
“All of this points to our view that the prospect of the first-rate hike coming in 2022 is more than just ‘plausible’,” she said.After saying it was “very unlikely” three months ago, falling unemployment and strengthening inflation data forced RBA governor Philip Lowe to last week concede that increases to the current record low 0.1 per cent overnight cash rate were “plausible” this year.
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