Powered by MOMENTUM MEDIA
realestatebusiness logo

Subscribe to our newsletter

Cash rate to fall again in August: HSBC

HSBC Australia chief economist Paul Bloxham says this month’s RBA rate cut was a close call, and the central bank is likely to wait until the second quarter inflation figures are published in July before cutting again.

In his RBA Observer Update for May, Mr Bloxham said the RBA’s minutes following the rate cut to 1.75 per cent spend a “considerable amount of time” on the outlook for inflation.

“The key question was the extent to which the new CPI numbers, which had surprised significantly to the downside, provided a signal about the ongoing trend in inflation and to what extent the weaker inflation print was temporary or due to measurement error,” he said.

Ultimately, the RBA determined the new information did not materially change the inflation outlook and elected to cut the cash rate to 1.75 per cent, according to Mr Bloxham.

“However, the degree of hesitancy revealed in the minutes suggests that the RBA is likely to be reluctant to follow up with a further cut without further clear information on the disinflationary trend,” he said.

Advertisement
Advertisement

“To us, this suggests that the RBA is unlikely to cut further until after the next CPI print, which is due to be published on 27 July.”

Mr Bloxham said HSBC’s central case has another 25-basis-point cut in the cash rate to 1.5 per cent, delivered in August.

“We then expect that, over time, underlying inflation may very well be a touch stronger than the RBA is forecasting, allowing the central bank to hold steady and point out that, although underlying inflation is below target, it is moving in the right direction and ahead of the forecasts,” he said.

“In doing this, the RBA would make use of the flexibility that is explicit in its inflation targeting regime.”

[Related: Industry figures applaud RBA cash rate call]

Cash rate to fall again in August: HSBC
mortgagebusiness

Latest News

With Anthony Albanese and several cabinet ministers sworn in following Labor’s election win, members of the mortgage and property industry...

The bank’s chief economist has responded to the RBA’s latest board meeting, maintaining that rates will lift by 40 bps next month. ...

The combined capitals recorded their lowest preliminary clearance rate for the year to date, with the CoreLogic analysts pointing the federa...

VIEW ALL

Join Australia's most informed brokers

Do you know which lenders are providing brokers and their customers with the best service?

Use this monthly data to make informed decisions about which lenders to use. Simply contribute to the survey and we'll send you the results directly to your inbox - completely free!

What is the maximum proportion of income borrowers should use to service a mortgage?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.