Rate cut still on the cards after inflation result

July 27, 2016

The Reserve Bank of Australia may look to cut the cash rate as early as August following today's inflation results, Mortgage Choice's chief executive officer John Flavell has said.

“Looking at the latest Consumer Price Index data from the Australian Bureau of Statistics, consumer prices rose by 0.4% over the last quarter and 1.0% over the year to 30 June,” he said.

“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.

Mr Flavell said the markets had already priced in another rate cut before today's CPI results were revealed.

“The market has definitely priced in a further cut (or cuts) to the cash rate, which has been reflected in the yield curve,” he said.

“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.”

Moving forward, Mr Flavell said even if the Reserve Bank of Australia doesn't cut the cash rate in August, we should expect to see another rate reduction this calendar year.

“Rates will more than likely fall lower this year. If and when this happens, all eyes will look to Australia's lenders to see if they follow suit and pass on the rate cuts to their customers.”