The Reserve Bank of Australia is unlikely to cut the interest rate at Tuesday’s meeting despite recent low inflation readings, according to AMP Capital.
Inflation experienced a “slump” in the September quarter, said AMP Capital chief economist Shane Oliver, however the inflation outcome remained in-line with the Bank’s expectations, making a cut in February unlikely.
Additionally, Mr Oliver said the RBA will likely “want to monitor the recent uptick in lending to property investors and see how the economy performs”.
“As a result all eyes will be on the post-meeting statement and the Statement on Monetary Policy to be released Friday,” he said.
The RBA is expected to cut its growth forecasts given the contraction in the market seen in the September quarter, Mr Oliver said, with the return of inflation to its target possibly being pushed out as well.
“Our assessment remains that - with record low wages growth, ongoing spare capacity, an increasing risk that low inflation will feed on itself and the Australian dollar remaining too high - the RBA will cut rates again around May,” he said.