Inflation Down, But Price Rises Still To Hit, Says JP Morgan

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Prices fall might not mean good news for retailers.

Weaker than expected inflation figures for Q4 2010 won’t necessarily bode well for economic prospects this year, say analysts.  

The inflation figure of 0.4 per cent recorded for the last quarter of 2010, was below the expected 0.7 per cent figure although this won’t necessarily mean more activity at the tills, with interest rates still forecast to rise on the back of the catastrophic Queensland floods, which took place earlier this month.  

The lower than expected figures also won’t prevent the RBA from raising their cash interest rate over the long term, JP Morgan economist Ben Jarman told the Sydney Morning Herald.   

“We are still coming to grips with the impact of those floods.”  

The drop in the price of consumer goods was despite an annual yearly inflation increase of 2.7 per cent, which also fell below forecasted 3.0 per cent figure.   

And rises are on the way, he says.  

“There might be a knee jerk reaction here that the RBA has some time (before raising the cash rate),” he said.

“But they can’t wait too long.”

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