You’d be forgiven for having a sense of deja vu today, given everyone was expecting a rate cut before the last RBA meeting in July.
Five weeks ago, Governor Michele Bullock and her monetary policy board stunned economists, traders and borrowers by keeping the cash rate on hold at 3.85 per cent, despite the market almost unanimously pricing in a cut.
Rather than going down the once bitten, twice shy route, experts are once again expecting a cut today.
So why are they so sure this meeting will be different to the last?
It largely comes down to two important pieces of data we’ve received in between.
The first was the unemployment rate which, for the first time this year, rose, going from 4.1 to 4.3 per cent when the June figures were released by the Australian Bureau of Statistics last month.
The second – and more important – was inflation.
Ahead of the July meeting, the RBA had only received monthly inflation data, which is not considered as reliable as the quarterly releases.
Bullock and her board were concerned that there were elements of that monthly data that suggested inflation could have been higher than what the official figures stated.
But when the latest quarterly data was released last month, it was about as good as anyone could have hoped for: headline inflation slowed to 2.1 per cent, right at the bottom of the RBA’s target range, and its lowest since March 2021.
At the same time, the trimmed mean – the RBA’s preferred measure of underlying or core inflation – also slowed, down to 2.7 per cent. The last time it was that low was December 2021.
So after Bullock said she wanted more data before moving to cut rates, it appears the data she and her board have received paves the way to hand down some relief today.
