However, I suggest that they have consistently misread the inflationary situation in recent years, especially since the global financial crisis (GFC). At the central bank’s monetary policy decision tomorrow for August, the odds are in favor 2/3 for the central bank to do just that. Arguably, a 0.25% cut is now fully priced into GBP.
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“Treasurer Scott Morrison appeared to lend support to the latest rate cut on Monday when he emphasised the nation faces a “really big challenge” in shaking off low inflation, low wages growth and low levels of business investment, as well as spill overs from a weaker-than-expected United States economy”. Both are expected to be forecast lower.
The Bank also expects moderate retail trade growth of 0.3 percent m/m in June but a more subdued growth forecast for the medium term.
The Q2 CPI print was always seen as the missing piece of information the Reserve Bank of Australia (RBA) needed to assess whether to ease the policy rate in this August meeting.
If the RBA cuts rates on Tuesday, AUD will plummet across the board with the Pound potentially advancing against it ahead of Thursday’s BoE meeting.
Of course, while it probably would have made little difference to our growth, or prospects, it is very hard to see why the cash rate is not as low as 1 per cent or less, except for the RBA’s bias.
The previous Friday saw an alarming picture come out of the USA, where the Q2 annualised GDP result rose from 0.8% to 1.2%, a major shortfall on the forecast 2.5%. The Australian dollar dropped on the news.
Chinese GDP came in at 6.7% year-on-year last quarter. Later in the month we will hear from the Reserve Bank of New Zealand. Investors had previously hoped that an ongoing slew of optimistic U.S. data would make it increasingly hard for the Federal Reserve to continue its current “wait and see” approach to monetary policy.
“Low interest rates have been supporting domestic demand and the lower exchange rate since 2013 is helping the traded sector”.
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“The case for it is that price pressures are weakening, and credit growth is slowing”.
