Rate Rises and Politics
The Reserve Bank today increased the official Cash Rate Target 0.25% to 5.75%pa. The last rise was 1 year 2 months ago on 2 March 2005. Same analysts suggest there was no need for a rise right now and that the RBA has selectively refereed to some of its inflation target statistics to support the decision. The Federal Treasurer seems unimpressed calling it a line ball decision. FinDem has some different analysis that might explain the RBA's timing.
The next Federal election is due between 4 August 2007 and 19 January 2008. The earliest date is therefore 1 yr 3 months away. The closest dates the RBA has previously increased rates before a Federal election was 1 yr 3 months pre-1996, 1 year 3 months pre-2001 and 10 months pre-2004 elections. Could be politics has them trigger happy. We will now have to wait and see whether they have scared the consumer horses too much.
Posted Wednesday, 3 May 2006
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