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Interest rates could remain on hold for the foreseeable future if the latest inflation expectations are anything to go by.
According to the Melbourne Institute of applied economic and social research, the expected median inflation rate has fallen to 2.7 per cent – well within the RBA’s target range.
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Last month, the Institute expected inflation to hover around 3.4 per cent.
Dr Michael Chua, a research fellow at the Melbourne Institute, said problems abroad had forced consumers and economic forecasters to review their inflation expectations.
“Consumers have lowered their inflationary expectations this month. This may be a reaction to the waves of negative news - there was news about "plummeting" share markets following the United States credit rating downgrade, news about contracting retail sales, and news about the RBA lowering their GDP growth forecast for 2011,” he said.
