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Disinflation Specter Augurs Record Rate Pause For Australia

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Australia is grappling with the disinflationary effect of falling commodity prices, raising the prospect the central bank will stay on hold for a record period.

Traders are pricing in little prospect of an increase in the cash rate in 2015 and no chance Reserve Bank of Australia Governor Glenn Stevens and his board will move from 2.5 percent tomorrow. Policy makers have also made it clear they regard the local currency, which climbed 0.6 percent against the U.S. dollar last month, as overvalued.

“Inflation expectations in Australia have broken through to the lows recorded in May 2009, the whitewash of the global financial crisis,” said Jarrod Kerr, a Sydney-based director of interest-rate strategy at Commonwealth Bank of Australia, the nation’s largest lender. “The decline in commodity prices has broadened disinflationary fears.”

Another overvalued currency.

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As long as asset prices (houses) are not deflating centeral banks are happy.

In reality they celebrate lower fuel, food and commodity prices but when asset prices deflate there is an all out panic with printing. In the US you only need to watch house prices to predict when the next batch of printing will start.

Judging by this ->>>>>


There will be no printing in the US for at least 6 months, baybe a token rate rise to rattle the China-Russia syndicate.

Edited by Wurzel Of Highbridge

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When you look at the importance of coal/iron ore exports to Australia and then you check the prices,there does appear to be a flaw in their plan.

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