As the world prepares to recover from the battered economy due to stringent 
COVID-19-induced lockdowns, inflation concerns have started to creep in. The 
recent inflation numbers of the US are worrisome, which is running at a 13-year 
high, currently at 5.4%. New Zealand saw its annual inflation surge 4.9% as 
against a rise of 3.3% in the previous quarter, marking it as the biggest 
annual surge in over a decade. 

    The New Zealand central bank has already started to contain inflation, 
hiking its cash rates by 0.25% to 0.5%, the first uptick in seven years. 

    The NZ inflation can rise further if the RBNZ stops here, therefore, it has 
signalled to further tighten the monetary policy and looks determined to cap 
inflation near 1%-3% target. The Kiwi dollar has also been on a run for last 
few days and has already rallied over 3.97% this month to US$0.7173 (as of 20 
October 2021, 2:55 PM NZDT), as the market participants expect more action from 
the RBNZ, especially to curb sky-high housing prices.

    Although Australia is still keeping its interest rates at bay, it may soon 
make a move. RBA is determined to keep cash rates unchanged till inflation 
sustains between 2% to 3%, which it does not expect to happen until 2024.

    However, the US is often slightly ahead of Australia and leads the 
inflationary period, and inflation could surpass this bracket well before 2024. 
Red hot crude oil prices, which have already surged past the US$85-mark, 
coupled with wreaked global supply chain creating shortages, are paving the way 
for cost-push inflation. Petrol prices alone in Australia have touched the roof 
and currently at a record high in Sydney, Brisbane, and Melbourne.  

    Any major relief from energy markets is not expected, especially when 
economies are preparing to open and tone down lockdown restrictions. Neither is 
supply chain expected to get back in shape anytime soon as the global pent-up 
demand has started to overpower the supply chain.

    Domestic inflationary pressure could be lowered to some extent by going the 
RBNZ way. However, the RBA is likely to be cautious and may not come out with 
all guns blazing as Australia's housing debt is expected to reach a record high 
this year, all thanks to dirt-cheap loans.

    Contacts: 
    Honey Bhargava, 
    honey.bhargava@kalkine.com.au, 
    AGM - Public Relations and Branding, 
    Kalkine Group  

    Logo: https://mma.prnewswire.com/media/1341740/Kalkine_Logo.jpg 


    Source: Kalkine Media