Economic growth rate has accelerated so how will this affect interest rates?
The Australian Bureau of Statistics said on Wednesday gross domestic product expanded 1.1% in the first three months of the year compared with 0.7% in the last quarter of 2015. And year-on-year growth accelerated from 2.9% to 3.1% which is the fastest pace in almost four years.
Even though the growth rate is only small it’s better than expected by most economists. The ABS said service-based industries were the other contributor to growth, with finance, retail trade, accommodation and food services, and arts and recreation all increasing.
So how will this affect interest rates?
The Consumer Price Index was down 0.2% for the quarter and the value of exports against the cost of imports was down 1.9%.
This could still force another cut to the cash rate by the Reserve Bank of Australia this year, despite the robust growth. Paul Dales Capital Economics’ chief economist said….
“As the RBA is more focused on inflation than growth, today’s data probably won’t prevent it from cutting interest rates to 1.5%, but not until the August meeting at the earliest”
Read full article here: SMH Article