Wednesday, October 26, 2011

Soft inflation result heightens chance of Melbourne Cup rate cut

An interest rate cut on Melbourne Cup day is shaping up as a slightly safer bet after the official reading of inflation came in softer than expected.

Listen to my analysis broadcast on The World Today.

The all important figure for underlying inflation came in lower than economists had forecast at 0.3 percent in the September quarter.

One of the Reserve Bank's preferred measures, the trimmed mean, came in at an annualised 2.3 percent, close to the bottom of the RBA's target band.

According to the ABS, headline consumer inflation was in line with forecasts, posting a 0.6 percent increase in the quarter and 3.5 percent over the year.

Read the statement from the Australian Bureau of Statistics.

When the RBA board meets next Tuesday the option of a 0.25 percent cut to 4.5 percent will be at the top of the agenda.

Apart from inflation, the Board will reassess the deepening debt crisis in Europe which could be at a dangerous new level if Eurozone leaders are unable to agree on a comprehensive solution.

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