No smoking gun for RBA today

by Adam Smith03 Apr 2012

The lowest inflation in two years may not be a "smoking gun" for the RBA to cut rates.

The TD-MI Monthly Inflation Gauge has shown benign inflation numbers for March. Prices rose 0.5%, following a 0.1% rise in February. In the 12 months to March, the Inflation Gauge rose only 1.8%, below the Reserve's target band. The result is the lowest annual rate in two years.

While inflation is slowing, TD Securities head of Asia-Pacific research Annette Beacher said it may not be enough to move the RBA when it meets today.

"While expectations for a near-term rate cut have been re-ignited, we cannot identify clear triggers for the RBA to recommend a rate cut [today], as lower inflation, lingering global risks and contractionary fiscal policy are slow burn issues, not smoking guns," Beacher said.

Beacher predicted the Reserve would remain "relaxed and comfortable" with the numbers, and instead reiterate its policy of easing should conditions "weaken materially".

"We still lean towards two 25 basis point rate cuts in the coming months, for a target of 3.75%," she said.

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Rate relief could be around the corner as funding pressures ease

Rate cut plea follows FHB drop

COMMENTS

  • by sidbroker 3/04/2012 12:50:16 PM

    RBA Just drop the bloody rates.