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ISCOVER
Jessica Darnbrough
The case for a rate cut became a little bit stronger yesterday after the latest CPI figures revealed inflationary pressures are benign.
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According to the Australian Bureau of Statistics, CPI rose just 0.6 per cent for the quarter – well within the Reserve Bank of Australia’s safety zone.
On the back of this news NAB chief economist Alan Oster immediately reviewed its rate outlook to include a 25 basis point rate cut next week.
“The softer CPI outcome, and in particular the lower near-term outlook means the RBA can relatively safely provide some near-term stimulus to the underperforming interest sensitive sectors of the economy,” Mr Oster said.
But it seems not everyone is sold on the idea of a rate cut in November.
Suncorp bank executive manager personal lending Tony Meredith said the CPI increase may not be enough for the central bank to loosen the reins on financial policy.
“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,” Mr Meredith said.
“Many economists are viewing today’s figures as the official tipping point for which way the RBA will go, but there is so much happening globally on a daily basis, such as the European debt crisis, that could still heavily sway the RBA’s position.
“It really still could go either way, but if we don’t get a rate cut next week, we may see one early in the next quarter.”
Mr Meredith said a shift in economic conditions and monetary policy direction would bring good news for many moving into 2012.
“A quarter of a per cent interest rate cut will save about $50 a month on an average $300,000 mortgage,” he said.
