According to Credit Suisse, the market was pricing in a 60 per cent chance of an August cut before the announcement, which lowered to 50 per cent afterwards.
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Core inflation rate, which removes volatile price swings, averaged 0.45 percent for the quarter and 1.5 percent for the year.
Third, positioning and valuation still favour shorts.
Economists say the official inflation numbers released on Wednesday, while largely in line with expectations, cement the case for the Reserve Bank to cut the cash rate at its meeting next week.
The Australian Bureau of Statistics’ hotly anticipated consumer price index (CPI) inflation data today revealed that a rate cut from the Reserve Bank of Australia remains a moderately strong possibility next week.
However, the data was just a touch hotter than the 0.4% quarter-on-quarter result expected and the market is now suddenly divided on whether there the RBA will deliver a cut to the official cash rate next week. Overall, the annual headline and core readings are still declining and this is just part of a global trend which reflects several key structural factors including, weak population growth, high and growing debt, disruptive technology, growing inequality and less-potent macro policy.
The Australian dollar fell to US$0.7466, having briefly been as high as US$0.7568 after the report, to be down 0.4 per cent for the day.
It then pulled back to below 75 USA cents once traders absorbed the details, Patersons Securities economist Tony Farnham said. “We are sticking with a cut next week”.
‘We expect that the RBA will move again to help ensure that inflation expectations do not become entrenched below two per cent, ‘ he said.
The biggest price gains came for healthcare, petrol, tobacco and new home purchases.
These rises were offset by falls in domestic holiday travel and accommodation (-3.7 percent), motor vehicles (-1.3 percent) and telecommunication equipment and services (-1.5 percent).
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Tuesday, when the RBA meets, is going to be huge.
