The rising of prices has been a great shock both in Australia and India. Both countries’ reserve banks have increased rates for as much as 50bp. This inflation alarm pushes the central banks in both countries to take a proper act. In Australia, the CPI headline has jumped 2.1% from Q1. So, the rate accelerated 5.1% from 3.1%. The Reserve Bank of Australia chose to cut the inflation measure when it climbed at 1.4%. This rate hike from the year-on-year increased to a 13-year-high of 3.7% from 2.6%.
This is basically beyond the bank’s 2% to 3% target range. The retail inflation in April also accelerated to 7.79% in India. The band tolerance of RBI is 6% from 2%. As a result, the central bank has revised the consumer price index forecast by 100bp to 6.7% for 2022-2023. The RBA announced in a statement that inflation skyrocketed massively. The major cause was due to the price hikes on electricity, gas, oil and petrol prices. So, the broads try to make sure that the inflation target should be back in stability in the targeted time.
The Reserve Bank of Australia argues that both size and timing of OCR future increase due to the inflation outlook in the labor market. In Australia, the wage climbed 0.7% in March with annual growth fastening to 2.4% from 2.3%. This is actually the highest annual rate since December 2018. The broad argument that an Australian resilient economy helps the country to normalize the monetary conditions for months ahead. Economists, on the other hand, also expect Indian interest rates to stay upward.
A chief investment officer for fixed income at SBI Mutual Fund, Rajeev Radhakrishan, argued that the 50 bp cannot be ruled out. He reflects to both external and internal backdrop that a front-loaded policy rate adjustment should be considered. Reserve Bank of India, Shaktikanta Das announced that the government high borrowing program would allow the bank to focus on the completion.
