Economists have raised their forecasts for headline inflation on the back of the Queensland and Victoria floods.
HSBC chief economist Paul Bloxham said it is widely expected that the floods will boost inflation as there will be additional pressure on wages due to reconstruction.
“We have raised our forecasts for headline inflation to 3.4 per cent over 2011 and for underlying inflation to 3.3 per cent.”
Last month, HSBC had both inflation measurements down as 3.2 per cent.
But despite the increased inflation forecasts, Mr Bloxham said it was unlikely that the Reserve Bank would lift rates before the second quarter.
According to Mr Bloxham, any inflation increases won’t be felt until at least June, which will then force the RBA to lift the official cash rate up to one per cent higher before year’s end.
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