Invest
RBA may cut rates faster if GDP data disappoints, economists say
The Reserve Bank of Australia may cut interest rates more quickly if next week's GDP data disappoints, economists said following today's consumer price index data for May.
RBA may cut rates faster if GDP data disappoints, economists say
The Reserve Bank of Australia may cut interest rates more quickly if next week's GDP data disappoints, economists said following today's consumer price index data for May.
The Australian Bureau of Statistics reported inflation remained within the RBA's target zone, with the trimmed mean rising to 2.8 per cent year-on-year.
However, construction work done data stalled at 0.0 per cent quarter-on-quarter against consensus expectations for a 0.5 per cent rise.
Krishna Bhimavarapu, APAC economist at State Street Global Advisors, said the inflation data was in line with expectations.
"Although the trimmed mean was up a notch to 2.8% y/y, the data are in line with expectations that inflation is in the RBA's target zone," Mr Bhimavarapu said.
"The key surprise was in the first partial data release for Q1 GDP – the construction work done which was reported to have stalled (0.0% q/q) against a consensus for a 0.5% rise."
"We increasingly feel that the RBA might cut faster or quicker if Q1 GDP data disappoints next week."
The April CPI came in slightly higher than expected at 2.4 per cent year-on-year, with the trimmed mean at 2.8 per cent, but remained consistent with the RBA's 2-3 per cent target range.
Dwyfor Evans, head of APAC macro strategy at State Street Markets, said nothing in the April data would deviate the bank from its recent statement following the cash rate announcement.
"Slightly higher than expected April CPI at 2.4% y/y with the trimmed mean at 2.8% but consistent with the RBA's 2-3% target range," Mr Evans said.
"Moreover, nothing in the April data to deviate from the Bank's recent statement following the cash rate announcement."
State Street's PriceStats online price series for Australia showed a modest uptick in May, but base effects would remain supportive for the official data for the next three months.
Mr Evans said base effects would become more of a challenge to the inflation target from September.
"Given the continued uncertainty around tariffs, strong jobs market and the base effects pressures in Q3, expect the RBA to maintain its cautious stance on prospective easing," he said.
State Street is one of the world's leading providers of financial services to investors with US$46.8 trillion in assets under custody and administration, and $4.7 trillion in assets under management.
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