If Reserve Bank of Australia (RBA) want’s to ease policy further, then inflation won’t be an issue going by the latest release today, which saw quite a pullback. However, it is unlikely for RBA, which has kept policy on hold, since last summer, will be very much eager to ease policy. Country’s real estate prices are still under upward pressure, due to foreign buying on weaker Aussie and domestic buying on lower interest rates.
In latest minutes, RBA policymakers have suggested that current policy is very accommodative. So without further and steady deterioration of consumer prices, policymakers will be less willing to make it very very accommodative.
Today’s reading showed, consumer prices rose 1.3% y/y in March, much lower than 1.8% expected and 1.7% observed in last quarter. Reserve Bank of Australia’s (RBA) preferred measure, trimmed mean CPI grew at 1.7% y/y, compared to 2.1% in last quarter. This rate of growth is slowest since 1999.
With inflation target between 2 to 3%, Reserve Bank of Australia (RBA) has much room to maneuver with interest rates being at 2%.
Whether RBA cuts or not, Aussie has suffered large from weak CPI. Down -1.4% against Dollar, trading at 0.764.
The material has been provided by InstaForex Company – www.instaforex.com