Dollars & Sense
Walking the inflation tightrope
May 30, 2024
Economist Greg Jericho discusses the challenges of managing inflation in Australia, emphasizing the risks of a rate rise in the current economic climate. He explores the impact of 'sticky' inflation on demand and delves into what policymakers can do to address the issue.
25:37
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Quick takeaways
- Stable but 'sticky' inflation at 3.5-3.6% prompts concern among economists, highlighting the importance of maintaining balance to prevent a deep recession.
- Rising prices impact consumer behavior, leading to a shift towards cheaper products despite stable inflation rates, raising questions about the effectiveness of interest rate adjustments.
Deep dives
Inflation Trends and Concerns
Inflation rates have been hovering around 3.5% to 3.6%, leading to concerns among economists despite being stable. The concept of 'sticky' inflation, where prices neither rise nor fall significantly, has emerged. The Reserve Bank's inflation target of 2-3% is viewed as arbitrary, with discussions on whether a slight decrease to 2.9% would significantly improve the situation. Economists are analyzing if inflation is stabilizing or accelerating, as stable inflation is crucial for economic health.
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