SCOREBOARD: Rates ruckus

The Reserve Bank will likely spread out cuts to avoid panic – but given the extent of inflation hysteria a total 75 bps reduction is probable.

Inflation is certainly lower than expected, and that has all manner of people writhing in glee about just how weak the economy must be. We ARE in a recession – see, I told you! Low inflation proves it! Unfortunately, and I do hate to cut the schadenfreude short, these views are based on a seriously flawed understanding of economics. The latest first quarter CPI numbers only confirm what I pointed out after the fourth quarter numbers – and that is that the factors that are dampening inflation are all temporary.



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