"We borrow at rates in the broader markets. Those lending rates are now pretty close to those average levels we?ve seen in the low-inflation period since the mid- 1990s."
Pretty close can be used in either the hike or pause debate, but the caveat of " in the low-inflation period since the mid-1990s" does favour another nudge up to make sure.
It will be a close call, given that there was considerable debate regarding the last move to 4.25%, but my revised view is that the prudent attitude of the Board will want to put another level of insurance into the structure.
Then they can adopt a look and see attitude, most likely for the following two months of June and July to then consider 2ndQ CPI, released late July, and continue rate hikes if required in August.
Whichever way it goes, it appears that a pause in nigh and target rates will end 2010 higher than they will be mid-year. Clearly the RBA board takes each month one step at a time, adding some transparent comments regularly to ensure the broad picture is clear.
This was most evidenced at the start of this tightening cycle with constant reference to returning rates to a more neutral setting and following up with rate hikes at every meeting, except February 2010, when the job was done for them by the Trading Banks. That check in running was advertised, in advance, by Ric Battellino.
Concluding , there have not been strong hints in the past month, apart from rate settings are "pretty close to neutral" and that " Greece is not impacting on rates ", in a similar was to the Trading Bank add-on rate hikes.
Glenn Stevens last comments of inflation were in his Toowoomba speech."
Our forecast a few months ago for 2010 was that inflation, measured either in headline or underlying terms, would be in line with our 2?3 per cent target. Next week?s figure will provide an insight into how things are tracking relative to that forecast."
Still tracking at the top of the band, does suggest close enough is not yet good enough.
One sure outcome, is that the white flag will be raised when the RBA is comfortable.
With apologies for the late revision.
Kind regards,
