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Inflation still hot, but RBA will stay cool: Economy roundup

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Inflation soared to a five year high in June, but most market analysts still believe the Reserve Bank of Australia is unlikely to lift interest rates when it meets tomorrow.

Inflation soared to a five year high in June, but most market analysts still believe the Reserve Bank of Australia is unlikely to lift interest rates when it meets tomorrow.

The TD Securities-Melbourne Institute inflation gauge recorded a year-on-year inflation rate of 4.8% in June, the highest level recorded since the measure started more than five years ago.

Monthly inflation increased a stronger than expected 0.5% in June, up from 0.3% the previous month.

The RBA has previously said that it does not expect to see substantial signs of inflation dropping in the short term, but has been looking for signs of slowing economic growth.

Those signs have continued to emerge in recent months despite the strong inflation numbers and today is no exception, with new data released this morning showing total private sector credit rose be a relatively low 0.6% in May.

On the markets, talk of a looming bear market in the US – the Dow Jones index’s 11,346.51 close on Friday was down 19.9% on it’s October high, just 0.1% short of a technical bear market – has not stopped the S&P/ASX200 lifting 0.4% by 12.30pm today to 5258.7.

It has, however, helped to renew support for the already strong Australian dollar, driving it up 0.16% today to US96.25c at 12.30pm.

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