“A particularly low core CPI outcome might persuade the RBA to reconsider the underlying strength of the domestic economy but, at this stage, we still feel a September cut to be more probable.” writes the analyst team. The headline rate is likely to be higher than the underlying rate.
Moreover, fruit and vegetable prices seem to have bounced strongly in Q2 and utilities prices may also have picked up. We anticipate a headline rate of 0.7% (1.4% through the year). Collectively, “this suggests that a cash rate cut in August seems unlikely based on these inflation numbers.” adds the team. However, if core inflation were to be as low as Q1 (0.3%), the RBA may seriously reconsider the extent to which that might signal the need for additional stimulus.