Spectre of inflation overshooting raised

Media statement Thursday, October 27th, 2005

Spectre of inflation overshooting raised

Businesses understand the inflationary pressures that the Reserve Bank responded to today by raising the official cash rate, the Employers & Manufacturers Association (Northern) says.

“Our concern is the Bank will overshoot the mark necessary to rein in inflation as economic growth declines,” said Alasdair Thompson, EMA’s chief executive.

“We are very concerned our exporters’success is again carrying the cost of excessive consumer spending.

“Our main trading partner, Australia, is not expected to increase its interest rates.

“Today’s move will keep the exchange rate high by attracting more overseas money here to take advantage of our extremely high interest rates.

“This will be to the detriment of our exporters’earnings, while keeping prices on the domestic market artificially low, thereby worsening our huge current account deficit.”

ENDS

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