Australian Consumer Price Index blows out to 7.30%, AUD and Aust bonds sell off. Reserve Bank of Australia Cash rate is far too low to have any impact on inflation. 5% could be the target. Emergency rate increase's cannot be ruled out.

 

What the hell is the Reserve Bank of Australia doing?   Like all Central Banks who are literally sitting on rates that are still way below the short end yield expectations of rate increases, whilst jawboning the market/s and in some cases as futile attempt (Bank of England) manipulation of the yield curve by, the irony of it all, by printing money to buy long dated gilts (bonds) to stabilize the pound and sell U.S.  dollars.  And the Bank of Japan is comical in its intervention (without increasing rates).  The only way and it is age old is slow and reduce inflation is to increase interest rates.  That's it.   After 20 years of monetary and fiscal expansion, we have the worst inflation in forty years.   

The mind boggles.

Chart above is the Australian Dollar (bar chart) with the annual inflation rate (Aust) at a whopping 7.30% highest in over 30 years and the current tiny interest rate at 2.60%.  Note white vertical line, dated August 2008 when rates were at 7.25% and the CPI was 5% and the Aust Dollar (AUD) was over 90 cents.  Admittedly this was in light of the 2008 financial crisis, which was deflationary.   The current crisis now is all out stagflation, so it is astounding how the RBA is allowing inflation to run.   This will ensure that the AUD and Australian bonds will continue to be sold off in earnest = even more inflation and a larger debt storm on the horizon.  

Separate pane beneath the chart is the Aust 10 YR yield, will the RBA need to lift rates to 5% to fall in line with short end bond expectations?