I am thinking of a number between 1 & 3

I am thinking of a number between 1 & 3.

Can you guess the number?

Give up?

There are only 2 numbers that matter right now.

Only 2 numbers the RBA cares about.

  1. The inflation rate.
  2. The unemployment rate.

So what are both these numbers doing right now?

In the December quarter, the headline inflation rate reached 7.8%. This is the highest rate in more than three decades.

On Wednesday we got the March quarter number which was a slight drop to 7%.

So even though it’s jumping around a bit, it’s still uncomfortably high.

The RBA started raising rates last year in May because they wanted to increase unemployment, hoping that would stop people from spending. They raised rates 10 times in a row, an unprecedented move.

So how did unemployment react?

Australia’s jobless rate held steady last month with employers adding more than 72,000 full time positions. The country’s unemployment rate for March was 3.5%, which is near the lowest since the mid-1970s.

Last month the RBA finally paused, opting to keep rates steady taking a ‘wait & see’ approach. Immediately the media & property spruikers were quick to herald the top of the interest rate cycle declaring the end of rate rises and some even predicting rate drops later this year.

So whilst the media & various commentators are saying one thing, the data/numbers are saying something very different.

So what do we do?

We sit & we wait.

And that is exactly what I am betting the RBA will likely do next week.

Kiril Ruvinsky