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Low inflation paves way for rate cut in Aug 2016

By madhu on August 1, 2016
Rate Cut expected in August 2016 The June quarter consumer price index figures, released by the Australian Bureau of Statistics (ABS), revealed a 0.4% increase on the March quarter figures and a 1% change year-on-year. While the CPI figures are only slightly below market and the RBA's expectations, they are still well below the RBA's target […]

Rate Cut expected in August 2016

Rate cuts expected

Rate cuts expected

The June quarter consumer price index figures, released by the Australian Bureau of Statistics (ABS), revealed a 0.4% increase on the March quarter figures and a 1% change year-on-year.

While the CPI figures are only slightly below market and the RBA's expectations, they are still well below the RBA's target band for inflation of 2-3 per cent.

There is an increasing risk that we may not be able to achieve the inflation target given pressure from mainly two sources:

  1. Lack of wage growth
  2. Oversupply of rental properties

The low inflation print confirms ongoing strong competitive forces in the Australian economy, as evidenced by recent results from the retail sector.

"We believe the RBA will cut the cash rate in August, because a sustainable resurgence in price pressures won’t eventuate for some time. Looking ahead, we also believe the trough of the current RBA rate cutting cycle is some time away”, Tim Stewart.

This rate cut is what we predicted in July, 2016. 

Article written by madhu

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