Inflation, Europe and Rate Rises

Yesterdays inflation figures came out showing the RBA is unlikely to achieve their expectations of mid-range inflation. The figures pushed the upper levels of their stated band of 2%-3%. In the absence of Greece and Portugal's downgrading it would be a foregone conclusion that another rate hike was on the way.

CPI Headline 0.9% qtr 2.9% y/y
CPI Trimmed Mean 0.8% qtr 3.0% y/y
CPI Weighted Mean 0.8% qtr 3.1% y/y

Troubles in Europe have brought some uncertainty to the rate hike equation. The recovery in other parts of the world is delicate and a default by Greece, a distinct possibility, will impact Australia in some way. Our side of the world is however doing pretty well and with inflation still high, with plenty of growth potential left in the economy, the RBA will be giving a rate tightening serious consideration rather than the pause that I believe was in the back of their minds until yesterday.