RBA rate cut imminent as inflation continues to stay stagnant

26 April 2019

We look set for an official interest rate cut before the federal election after inflation figures came in under target this week.

If the RBA cuts their cash rate it will be the first move they have made since August 2016.

Australian Bureau of Statistics figures this week revealed the headline inflation rate came in at zero during the March quarter from the December quarter.

These figures forced the annual rate of inflation down from 1.8 per cent to 1.3 per cent.

On an underlying basis the inflation rate rose 1.4 per cent which is well short of the RBA’s target of 2-3 per cent.

AMP Capital chief economist Shane Oliver told The Australian that in the light of the low inflation figures the RBA would no longer want to wait until unemployment started to improve before making a move.

“We have been looking for two rate this year since last December and had thought that the RBA would wait until after the election before starting to move,” he said.

“However, with underlying inflation coming in much weaker than expected, our base case is now that the first cut will come next month.”

The low inflation and stubborn unemployment figures point to a slowing national economy, but in light of the anticipation of a looming rate cut the sharemarket surged to its highest level in over a decade.

Many economists that expect a rate cut before the election also think there’ll be another ne shortly after to bring the official cash rate down to 1 per cent by the middle of the year.


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