Sam Ferraro

The CPI print revealed that disinflationary forces intensified in Australian in the March quarter. Underlying inflation posted a quarterly rise of only 0.18%, the smallest increase since the inception of the series in 1982, while the annual increase of 1.5% was also the lowest on record. The record low inflation outcome will cause a headache to RBA Governor, Mr Glenn Stevens. He has developed a reputation as the reluctant rate cutter, having recently re-iterated his view that the potency of monetary policy is diminished at low rates of interest and endorsing structural policies to boost growth. But the growing shortfall in aggregate demand evident implied by the low CPI print points to the prospect of a slowdown in employment growth. Surely the role of a central bank is to revive animal spirits when the psychology of risk taking is muted. With underlying inflation now 50 basis points below its target, Evidente re-iterates the view that the RBA Board should deliver monetary stimulus at its meeting next week. (VIEW LINK)


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