In the wake of the softer than expected September quarter CPI figures, YieldReport put together a round up of analysts’ comments. No commentator which YieldReport follows forecast inflation at such a low rate so the market impact may well be greater than usual.
Chief economist from BT Chris Caton, “Inflation is simply not a concern at present” and suggested that while it’s a close run thing, he is staying with his call that the RBA will not cut in November. Of interest will be the RBA’s rhetoric from next week’s meeting and whether the recent rise in retail mortgage rates gives them a basis to ease without stoking an already hot property market.
Scott Haslem from UBS said, “With core at 0.25% q/q” it was “one of the two lowest outcomes in almost 20 years.” With the headline CPI below the RBA’s 2-3% target now for a year, “there’s little here to stop the RBA offsetting the recent regulatory inspired retail rate hikes when it meets next week.”
Michael Blythe, chief economist at the CBA, noted that the CPI result was below even the RBA’s recent forecast. “Deflation is not a risk” and because there were “some unusual price outcomes in Q3” the CPI was not “low enough to ‘demand’ a rate cut at next week’s RBA Board meeting. “The cash rate should remain at 2% when the RBA meets next week. But the odds on a cut have clearly lifted.”
AMP’s chief economist Shane Oliver, said “The bottom line is that pricing power remains very weak reflecting constrained growth in retail sales and cautious consumer confidence. The fact that inflation is lower than expected and below target despite a 20% plus fall in the value of the $A over the last year adds to the case for the RBA to cut the cash rate again in order to offset the potential negative impact on the economy of big bank mortgage rate hikes. I continue to expect the RBA to cut the cash rate by 0.25% when it meets next week or if not then, then sometime in the next few months.”