Pressure mounts on RBA to cut rates after inflation falls again

Marco Green
April 24, 2019

Australian inflationary pressures weakened further in the March quarter, increasing the odds the Reserve Bank of Australia (RBA) will cut official interest rates in the months ahead.

Underlying inflation - ore more importance when it comes to the outlook for monetary policy settings from the RBA - rose by 0.19% during the quarter after seasonal adjustments, a result well below expectations for a larger increase of 0.4%. Yields on the three-year bond slid 14 basis points to a record 1.29 percent.

All else being equal on the dollar side of the equation, a RBA rate cut for May is basically nearly already priced in now so any scope for further aussie is weakness is a bit hard to justify - especially a significant move well below the 0.7000 level. London traders may continue selling the Aussie below 70 USA cents, he said.

The inflation data miss, with first-quarter prices stagnant, adds to other signs of a slowing economy that has been sapped by a property market slowdown and the U.S.

At 11:45am (AEST), the dollar was buying 70.39 USA cents as traders' expectations of a rate cut in coming months increased. Chief Economist Bill Evans made the forecasts for lower interest costs. Headline inflation was flat, compared with the 0.2 percent estimates.

Markets had been expecting a quarterly increase of 0.2% and year-ended rate of 1.5%.

Other reports by Click Lancashire

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