Rates set to stay put
INFLATION has again undershot expectations and looks likely to keep the Reserve Bank of Australia sidelined on interest rates for some time yet.
The consumer price index rose 0.4 per cent in the three months to June, just short of market expectations of a 0.5 per cent rise, and in line with the first quarter figure of 0.4 per cent, figures from the Australian Bureau of Statistics yesterday showed.
The annual headline rate was 2.1 per cent, below market expectations for a 2.3 per cent rise, and at the bottom end of the RBA’s two- to- three per cent target range.
AMP Capital chief economist Shane Oliver says a rise in the cash rate from a record low of 1.5 per cent was unlikely before 2020 and warned the RBA’s next move could even be a cut if conditions worsen.
“We remain of the view that the RBA won’t raise interest rates until 2020 at the earliest and, given the weakness in inflation, wages and the Sydney and Melbourne housing markets along with the uncertain outlook for consumer spending, the next move being a rate cut cannot be ruled out,” Mr Oliver said in a statement.
CommSec senior economist Ryan Felsman also agreed that the RBA won’t be touching interest rates “any time soon”.
The RBA expects underlying inflation to hold near 2 per cent for the next 18 months.