David Plank, analyst at ANZ, thinks that declining inflation expectations are a factor in the RBA’s decision to ease monetary policy.
“The RBA Governor recently said that the Bank has “to guard against th[e] possibility…that Australians come to expect sub-2 per cent inflation on an ongoing basis”.”
“We think the path taken by inflation expectations will be important in the RBA’s future policy deliberations. For now, we think the weakness in expectations supports our (admittedly recent) view that the RBA will take the cash rate to 0.75% by the end of 2019.”
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