Interest rates remained unchanged as inflation, slightly higher than anticipated at 3.6% and down from December’s 4.1%, still exceeds the Reserve Bank’s target range of 2% to 3%, complicating monetary policy decisions, according to a Ray White economist.
Nerida Conisbee (pictured above), chief economist at Ray White, commented on the current situation.
“While it’s great news inflation is coming down, it's still above the Reserve Bank of Australia’s target of between 2% and 3% and additionally is not coming down quick enough to cut rates in the near future,” Conisbee said, suggesting that hopes for a rate cut might be premature.
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Initial market expectations hinted at a possible rate cut by October. However, recent inflation figures have pushed this expectation to April 2025.
“The March inflation figures changed the outlook for interest rates dramatically,” Conisbee said.
The upcoming economic growth figures, set to be released in early June, are pivotal.
“If we see a decline in GDP, it may be enough to push the RBA to move more quickly, perhaps even cutting rates while inflation remains above 3%,” Conisbee said.
Internationally, the scenario varies. The European Central Bank may cut rates as soon as June, while the UK's recession and persistent high inflation have delayed any potential cuts until the third quarter. In the US, earlier predictions of three rate cuts have been scaled back due to similar economic pressures, the Ray White economist said.
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