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The nation’s inflation rate has hit a six-year high

29 October 2021

After what seems like an eternity there are signs of life from the nation’s inflation figures and it could mean interest rates start heading north.

The house price boom and now soaring fuel prices have driven the inflation rate to its highest point in six years.

The consumer price index was up 0.8 per cent for the September quarter and it lifted the underlying quarterly inflation rate by 0.7 per cent which was higher than economists had expected.

Demand for goods during these COVID times has risen thanks to cashed up consumers and it has caused delays in supply and rising shipping costs.

The Reserve Bank had not expected inflation to rise above 2 per cent until well into 2023 and has repeatedly said that if that was the case interest rates would remain at their record low of 0.1 per cent until 2024.

The surprise inflation figures have got economists talking however, with some saying the RBA could be looking at rate rises as early as next year.

“The period of ultra low interest rates is gradually coming to an end and central banks will start to increase interest rates,” AMP Capital economist Shane Oliver said this week.

AMP Capital have now forecast the official cash rate to rise to 0.25 per cent in November 2022.

The central bank will no doubt want to see more than just this week’s inflation figures before pulling the trigger.

“The RBA will be alert at this point, but not alarmed,” CommSec chief economist Craig James said.

“And we won’t get clearer readings for a few months yet.”

“So the debate about whether inflation is just transitory or it has more persistent qualities will rage for a little longer.”

 

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