It’s pause time for the Reserve Bank when it comes to its excessive program of interest rate rises, but some experts are questioning whether Dr Phil Lowe will backdown and hold back on the 11^th rate hike in less than a year.

AMP economist Diana Mousina has no doubt that it’s time for a pause. Her note yesterday was headlined: “Australian inflation data cements a pause at next week's RBA Board meeting.” I reckon she’s right. I only hope Dr Phil is on a unity ticket with Diana and me.

If he’s not, he and his board are crackers!

Backing up her argument, this is what Diana observed about the data drop on inflation yesterday: “The monthly February consumer price data came in below expectations, rising by 0.2% or 6.8% over the year (market consensus was for annual growth at 7.2% and we were expecting 6.9%) down from 7.4% year on year last month. This is another confirmation that inflation peaked in December, (at 7.8% year on year on the quarterly data or 8.4% year on year on the monthly data). We expect headline inflation to be around 4% by the end of the year.”

That said, anyone looking at the next graph would see why the RBA, like other central banks, were worried about inflation and its stubborn stickiness in staying high.

The quarterly inflation reading in red has spiked and has only levelled off, but the monthly numbers in green tell a better story. These are the ones Dr Phil needs to use to make his decision.

The December quarter saw the annual rate rise to a big 7.8%. This is how Tradingeconomics described it: “The inflation rate in Australia increased to 1.90 percent in the fourth quarter from 1.80 percent in the third quarter of 2022, marking the fourth consecutive quarter to show a rise greater than any seen since the introduction of the Goods and Services Tax in 2000.”

That shows you why Dr Phil has been spooked enough to make so many rate rises, but the December quarter started in October last year. By then, there had been only five rises and many borrowers — 40% — were on fixed rate home loans and so were unaffected by rate rises.

Also, China was still struggling with lockdown madness so supply-side costs were still elevated, but now that has changed. On top of that, the price of oil has fallen from $US90 a barrel to $US73 over that time.

That’s why the newer statistic — the monthly CPI — looks like a better number to watch right now. I’m hoping Dr Phil agrees.

I think respected SMH business commentator Elizabeth Knight makes a really smart point about inflation. “The case for leaving rates on hold is buttressed by the fact that many of the biggest contributors to February inflation came from essential categories,” she wrote. “Food and non-alcoholic beverages were up 8 per cent, housing rose 9.9 per cent, and electricity was up 17 per cent. The price increases in these categories are largely driven by supply rather than excess demand.”

So, if it’s supply, another rate rise could kill demand when it’s already in sick bay, as the latest retail numbers showed on Tuesday.

I could show you other indicators for the economy where the rate rises are killing demand, such as building approvals, consumer confidence, business confidence and so on, but this chart from the AMP economics team shows how forward indicators are showing that inflation is falling faster than the official quarterly CPI numbers.

And believe it or not, Diana shows that even airfares are starting to fall! The chart below shows it via the red line for three-month average discount airfares.

And even rents are starting to stop rising and are falling in some areas.

I think Dr Phil not only has enough reason to pause on rates next Tuesday, but with the banking crisis fears and the mortgage cliff coming mid-year, where fixed home loan borrowers jump on high variable home loan rates of interest, there are many good reasons to stop hiking altogether.