Inflation to go up more than expected, says RBA

The assistant governor of the Reserve Bank of Australia (RBA), Philip Lowe, has predicted that the recent floods, combined with the damage caused by the cyclone, could push inflation up over the coming weeks.

Just last week a statement published by the central bank stated that the state economists predict inflation to stand at 2.5 per cent for the 12 month period to the end of 2011.

However, Mr Lowe has now stated that, with the damage caused by the recent natural disasters set to push banana prices up, this could rise to as much as three per cent before the end of the summer.

"The Bank now expects CPI inflation to be around three per cent over the year to June 2011, with the combined effect of floods and the cyclone likely to contribute around 0.5 percentage point to this outcome," he said.

Looking further forward, he added that the RBA expects inflation to carry on increasing to the end of 2012, though only gradually.

At the same time, the world is reacting to the Chinese government's announcement that consumer prices there have rocketed 4.9 per cent in January alone.

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