'Incredibly low' inflation figures will see rate cut next week

by Julia Corderoy28 Jul 2016

Disappointing inflation figures may force the Reserve Bank of Australia to cut the official cash rate next Tuesday in its August monetary policy meeting.

Consumer Price Index data released by the Australian Bureau of Statistics (ABS) show consumer prices rose by 0.4% over the last quarter and 1% over the year to 30 June. Mortgage Choice chief executive, John Flavell, said this is “incredibly low”.

“While these results were largely in line with market expectations, the yearly rise of 1.0% is incredibly low by historical standards.

“This less than impressive inflation result will certainly provide the Reserve Bank with the incentive they need to cut the cash rate again this year.”

But Flavell said the market had already priced in another cash rate cut prior to the release of the inflation figures.

“Overall expectations are for lower cash rates for longer in Australia (and similarly globally). This seems to come out of increased volatility in the markets, most of which can be attributed to Britain's vote to leave the European Union,” he said.

The cash rate is currently sitting at 1.75%, after the RBA reduced it by 0.25% in May this year.