Uptick in inflation does not mean end to rate cuts, say economists

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Inflation, as measured by the annual change in CPI, accelerated 3.2% year on year in July from 2.2% previously

Inflation accelerating to above the lower end of the Reserve Bank’s target range for the first time since the severest phase of the Covid-19 lockdown will not prevent further interest-rate cuts, according to economists.

That was because a weak economy, which some said might have shrunk by about 50% in the second quarter, will keep a lid on price increases, enabling the Reserve Bank to add to the 300-basis points of cuts in 2020 so far, which have left the main rate at the lowest level in about half a century.

 

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