Higher rates inflate inflation figure 30 April 2008
Analysts are calling on the Reserve Bank to take the effect of higher interest rates into account when considering how to respond to an inflation rate of 4.2 per cent when it meets to review the official cash rate next week. Information for the Australian Bureau of Statistics shows that higher interest rates and bank charges added 0.2 per cent to the annual inflation rate which had been expected to come in at 4 per cent. The higher than anticipated result dashed any hopes of interest rates being cut this year. AMP chief economist Shane Oliver described the situation as "very perverse". "Interest rates have gone up, which in turn has added to the risk of another rate hike. So you have this kind of circular effect going on," he said. CommSec analyst Craig Jones points out that higher rates have also slowed house building activity which in turn is causing rents to soar which then forces inflation higher.
