Rate rise risk recedes

The risk of a pre-election  interest rate rise has eased, with the release of a new set of inflation figures.

The Australian Bureau of Statistics reported today inflation, measured on the Consumer Price Index, rose by 0.6 per cent in the June quarter, to an annual rate of 3.1 per cent.

However, the quarter’s rise was driven, largely, by a 25 per cent increase in tobacco excise, that the Federal government ordered, to discourage smoking.

The Reserve Bank, which set Australia’s interest rates, discounts one off factors, like that, when it makes its assessments.

The bureau said the trimmed mean, which the bank does watch, when setting rates, rose by 0.5 per cent in the June quarter and 2.7 per cent over the year.

That annual rate was down from 3 per cent at the end of the March quarter.

The Reserve Bank aims to keep Australia’s inflation rate, on this measure, between 2 and 3 per cent, over the course of a business cycle.

It has already raised rates six times, on the current upswing.

However, it left rates on hold, after its board meeting earlier this month.

Its board will meet again, next Tuesday, to review rates.

In the minutes of its last meeting, the bank said that concerns over both national and bank debt levels in Europe had been a factor in its decision to keep rates on hold at that time.

However, an official assessment, released since then, concluded that most European banks are in a position to withstand a further downturn in the global economy, if one should occur.

That might encourage the Reserve Bank to raise rates, once again, next Tuesday.

Although economists are divided on when the next rate rise might be, very few are confident that the present round of rate rises is already over.