Last week the Australia economy saw deflation for the first time in seven years. And the RBA yesterday cut interest rates by 0.25%. This is the lowest cash rate for several years.
So what is the interest rate outlook for the remainder of the year?
The ABS said the consumer price index dropped to 1.55% which well below the bottom of the RBA’s target band of 2% to 3%. This is due to falling petrol, food, and clothing prices driving down the cost of a basket of goods and services.
This could force the RBA to cut interest rates again this year, say economists.
“We now expect the RBA to cut by 25 basis points in May and a further 25 basis point cut in August,” said Sally Auld from JP Morgan.
This means the cash rate could finish the year at 1.50%. Read full article here: SMH Article