Rate cut a line ball

by Adam Smith27 Oct 2011

Inflation numbers are lower than anticipated, but may not be enough to trigger a rate cut.

Yesterday's ABS release of consumer price index numbers saw the CPI rise 0.6% in the September quarter, compared to a 0.9% rise in the June quarter. Analysts had tipped a 0.8% rise.

Tumbling prices for pharmaceuticals, consumer electronics, fuel, vehicles and fruit and vegetables offset rises in utilities, rents and property rates and charges. The result brough the CPI for the year to the September quarter to 3.5%. Weighted median and trimmed mean inflation numbers, however, were more modest at 2.6% and 2.3%, respectively.

While the numbers fall within the RBA's inflation target band, Suncorp executive manager of personal lending Tony Meredith said the chances of a Melbourne Cup Day rate cut could "go either way".

"While international financial uncertainty and today’s CPI figures may still give the RBA the impetus to cut rates, other solid domestic indicators could see them sit on the sidelines again come Cup Day," Meredith said.

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