00:01Inflation is elevated.
00:03We saw with the latest inflation data that the headline rate moved to 4.1% on the quarterly
00:09series which is a two and a half year high and the underlying series which the RBA really
00:15focuses on also moved higher to 3.5%.
00:19So inflation is elevated, it's above the target band, inflation expectations are rising and
00:26then the hostilities in the Middle East which has seen the blockage of the Strait of Hormuz
00:31means that we've got higher prices for fuel, fertiliser and chemicals that are being passed
00:37through and that's a real risk for inflation in terms of the outlook.
00:42So when you put that all together alongside low unemployment it does really point to the
00:47fact that the RBA is going to need to raise rates.
00:50We expect that they will deliver a rate hike but it will be a close decision because last
00:56time they met it wasn't unanimous and we could see that transpire this time again.
01:01Yeah so another split decision looking likely as you say and you know really balancing that
01:07need to control inflation of course but also that fear of tipping the economy into recession.
01:13Tell us about those calculations being made here, just how difficult that is.
01:17It will become an increasingly difficult problem particularly given that the cash rate settings
01:24right now are restrictive.
01:25So they are starting to see a little bit of a slowing in spending, we are seeing a softening
01:32in the rate of growth in house prices, auction clearance rates are lower, consumer and business
01:38confidence is lower.
01:39So higher rates will soften economic activity as will higher fuel prices which of course we've
01:47seen Brent crude jump again overnight due to the fresh threats between Iran and the United
01:54States.
01:55But the challenge for the Reserve Bank will also just be containing inflation expectations and
02:01the second round and third round impacts from high inflation from the Middle East war.
02:07And so we favour that they will need to raise rates in the near term.
02:13But then over time they will need to factor in how long it will take to get back into the
02:19band from inflation and what that means for the growth.
02:23slow down, stats of Keep up,控
02:23So we will have to take a look at this part, we will be doing the best.
02:23So the game may be taking place to the edge of the line but we will have to go to
02:24the end.
02:24So we will be doing this, we will be doing this depending on how long it will add to the
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