Inflation is pretty much dead right now. So what's with the market's overreaction?

If there is any sign that the Australia economy is in a weird place, it is the reaction to Wednesday’s inflation numbers. The annual inflation rate of 1.7% is well below the Reserve Bank’s target rate of 2% to 3%. Yet the market’s response was based on the assumption that inflation was too high to allow the Reserve Bank to cut rates next week. There really is no getting past the fact that inflation at the moment is historically low. While as a general rule, the Reserve Bank doesn’t focus too greatly on the official “consumer price index”, even if you use the RBA’s underlying inflation measures of the trimmed mean ......