From the wind vane:
It looks like I was wrong. The unforeseen collapse in inflation, a free-fall in business conditions and erratic consumer sentiment means that the RBA will not be hiking interest rates any time soon. It may even cut rates such was the extent of the disinflation impetus that came through in the March quarter CPI.
I don’t think the RBA will actually pull the trigger on a rate cut, but it looks like my long held view that the RBA would be hiking interest rates in the September and December quarters is redundant. With the weight of new news, I am changing my view.
NAB flips today as well:
The February forecasts showed medium-term inflation consistent with the midpoint of the RBA’s band
It will be surprising if this new forecast isn’t lower than their February forecast – certainly for 2016 and possibly beyond.
RBA remains an inflation-targeting central bank, so faced with this new lower inflation forecast it now seems likely that the bank’s board will vote in May to take the opportunity to provide some slight further assistance to the Australian economy and so potentially help lower the unemployment rate more quickly than previously forecast.
I’ll stick with no cut next week but one is certainly coming, as we’ve said all along.
