I could never be accused of hawkish bias. To ensure that the other side of the story gets its dues, here is CommSec's notoriously dovish Craig James--in fact, Craig and Peter Switzer are probably the two highest-flying doves in Australia--questioning whether the RBA should cut (yes, that's right, cut) rates...
"There is no smoking gun, so interest rates are almost certain to remain on hold for another month. Not only has the latest data shown an easing of inflationary pressures but hiring intentions have slumped as businesses join consumers in adopting a conservative posture.
The timeliest reading on inflation in the economy – the TD Securities/Melbourne Institute inflation gauge – confirms that underlying inflation remains stuck in the lower end of the Reserve Bank’s 2-3 per cent target band. In fact, based on trends over the past five months, underlying inflation is tracking closer to 1.5 per cent – well below the RBAs target band.
The slump in job advertisements is a clear wake up call for those that still believe the economy is in solid shape. Consumers aren’t spending, the housing market is becalmed and now businesses aren’t taking on more staff.
Could the next move in interest rates be down, rather than up? Clearly the Reserve Bank Board would need to make an almost 180 degree turn, so it most likely will stick to the view that the economy will recover later this year. However it is obvious that the economy is only marking time at present with underlying inflation holding below the key 2-3 per cent target band. We expect the Reserve Bank to remain on the sidelines until it has a clearer read on the economy."
