RBA to announce inflation data this week

Tuesday, 24 Jan 2012

Inflation data for the final quarter of 2011 is set to be released tomorrow by the Reserve Bank of Australia (RBA) - a moment that represents a "key milestone for Australian savers and borrowers", according to Christopher Joye of Business Spectator.

Most Australian banks have passed on the two consecutive rate cuts made in November and December last year, but economists are still divided as to what the best course of action will be for the RBA when it meets again in early February.

The Reserve Bank, Joye explains, has two options - keep rates steady for the time being while further information is collected on the state of the domestic and international credit markets, or make a third consecutive cut to the cash rate.

However, if the RBA exercises the second option when it meets next month, the action needs to be passed on by the nation's major lenders.

"There is little doubt that a rate cut that was not passed on by the banks could prove damaging and destabilising to community confidence," he asserted today (January 24).

Minutes of December's RBA monetary policy meeting reveal concerns over the European debt crisis, although analysis of the domestic market during the month of November showed "no signs of strain in local money markets".

The RBA also acknowledges that in addition to the two cash rate cuts at the end of last year, further action is expected by the middle of 2012.