Inflation figure leaves door open for August rate cut by RBA

Inflation figure leaves door open for August rate cut by RBA
Inflation figure leaves door open for August rate cut by RBA

According to the Australian Bureau of Statistics, consumer prices rose by 0.4 percent from the prior quarter and 1 percent over the year to June 30.

The numbers were largely in line with economist projections.

Today’s inflation figures were highlighted by the RBA as key to any decision to cut the rates again.

The yearly rise of 1 percent is the lowest since the 1999 June quarter of 1999 so leaves the door open to a further rate cut this year.

With underlying inflation at 1.5 percent year on year, which is what the RBA especially watches, and still below the target 2 percent to 3 percent, many forecasters still see the case for another rate cut.

The A$ actually jumped on the latest ABS release, but then came back a tad in late morning trade.

Opinions remained divided but the general consensus was echoed by Stephen Koukoulas ‏tweeting: "There's the rate cut locked in for next week."

CommSec also suggested the chances of an RBA rate cut next week have increased after the release of softer than expected 2Q inflation.

CommSec's Craig James then issued an advisory that noted inflation is stubbornly below the Reserve Bank’s 2-3 per cent target band.

"And importantly it is unlikely the Bank will look to revise the target any time soon.

"The only way that the Reserve Bank can seek to lift the inflation rate to the target band is by running the economy at a faster rate and that means cutting interest rates.

"So a rate cut will be on the agenda at the Reserve Bank Board meeting next Tuesday.

"Will a rate cut actually boost growth? It is far from certain, but the Reserve Bank has to try.

"But the Reserve Bank won’t continue to cut rates if it’s clear that interest rates at super-low levels have become ineffective in boosting demand."

THE ALL GROUPS CPI

  • rose 0.4 percent this quarter, compared with a fall of 0.2 percent in the March quarter 2016. 
  • rose 1.0 percent over the twelve months to the June quarter 2016, compared with a rise of 1.3 percent over the twelve months to the March quarter 2016.


OVERVIEW OF CPI MOVEMENTS

  • The most significant price rises this quarter are medical and hospital services (+4.2 percent), automotive fuel (+5.9 percent), tobacco (+2.1 percent) and new dwelling purchase by owner-occupiers (+0.9 percent). 
  • The most significant offsetting price falls this quarter are domestic holiday travel and accommodation (-3.7 percent), motor vehicles (-1.3 percent) and telecommunication equipment and services (-1.5 percent).

 

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Inflation figure leaves door open for August rate cut by RBA

 

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Inflation figure leaves door open for August rate cut by RBA

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

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Inflation

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