RBA: Another cut to help stoke inflation – HSBC

Paul Bloxham, Chief Economist at HSBC, notes that the RBA cut its cash rate by 25bp to 1.50% today, in line with the market and HSBC's expectations.

Key Quotes

“Although growth is holding up well, inflation is too low. The RBA noted that 'prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing monetary policy at this meeting'. The statement provided little forward guidance, beyond noting that inflation was expected to remain low for 'some time'.

We expect the RBA to now spend the next few months noting that they are waiting to see the full effect of the 50bp of cuts that they have delivered this year. Looking further out, we see wages growth and local inflation gradually lifting, as the rebalancing act comes to its end (around mid-2017, in our view). We see the RBA on hold in coming quarters, rather than cutting further.”