From ANZ:
"Today's disappointing retail sales data does not mean the RBA's job is done. Remember, the Bank is looking for consumer spending to slow in order to arrest the inflation threat from the once in a generation investment boom. If we needed further evidence of the room that needs to be made, just look at today's building approvals data, which showed Queensland non-residential building approvals rose 333% in March (to be 325% above pre-flood levels).
Activity data on the state of the Australian consumer is not the focus for policy-setting. The most important data for this week is not today's retail sales data, but tomorrow's RBA inflation forecasts (out in the Statement on Monetary Policy at 11:30 AEST). The language in Tuesday's RBA Statement, which indicated that inflation was now going to be "close to" not "consistent" with the RBA's target suggests that Bank has been forced to upgrade its core inflation forecast to 3.0% by end-2011, with the recent rise in the A$ not enough to offset the now higher starting point. With core inflation to rise to the top of the target band and the Bank still forecasting at or above-trend medium-term economic growth, the risks to inflation look asymmetric. We maintain that the risk of an interest rate rise in the next couple of months is higher than the less than 50% chance that the market is currently pricing."
