The Reserve Bank of Australia has cut the cash rate by 25 basis points to 1.75 per cent – the first time the cash rate has been changed in 12 months.
The RBA's decision to cut comes after a surprisingly low inflation figure of 1.3 per cent year-on-year was released last Wednesday.
The ASX futures market has been pricing in a 50/50 chance of a rate cut to 1.75 per cent versus 'no change' since the release of the inflation figures.
With a target inflation rate of between 2 and 3 per cent, concerns about a lack of growth in the Australian economy spurred by the low Consumer Price Index readings appear to have forced the RBA's hand.
HSBC chief economist Paul Bloxham said the low inflation numbers had made a May rate cut likely, despite the fact that the federal budget is on the same day.
"The RBA’s preferred measures of underlying inflation both fell well short of market expectation and are tracking well below the RBA’s last set of forecasts," Mr Bloxham said.
"These core measures of inflation have also declined to be convincingly below the bottom edge of the RBA’s 2-3 per cent target band."
The RBA was in a "tricky spot" leading up to its decision today, given that the unemployment rate has been falling and business confidence improving.
"However, although growth has been solid, it has not been strong enough to keep inflation on target," Mr Bloxham said.
"All of this adds up to suggesting that the RBA will need to cut its cash rate further. It now also seems likely that a 25 basis point cut may not be enough," he said.
The specialist platform provider has posted an underlying net profit after tax of $17 million for the half year to 31 December 2018. ...
Three founding members of Macquarie’s Asian Listed Equities division have established Stonehorn Global Partners and launched the Hong Kong...
IOOF has generated strong results for the first half despite the shake up from the royal commission and a drop in earnings, with its underly...