{"id":45145,"date":"2025-08-05T10:57:13","date_gmt":"2025-08-05T10:57:13","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/45145\/"},"modified":"2025-08-05T10:57:13","modified_gmt":"2025-08-05T10:57:13","slug":"lower-aussie-inflation-but-fewer-rate-cuts","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/45145\/","title":{"rendered":"Lower Aussie inflation, but fewer rate cuts"},"content":{"rendered":"

The news on inflation continues to improve, following the latest benign Q2 CPI print from the Australian Bureau of Statistics (ABS).<\/p>\n

\"Headline<\/p>\n

On Monday, the Westpac-Melbourne Institute (MI) monthly CPI gauge was released. As illustrated below by Justin Fabo from Antipodean Macro<\/a>, quarterly trimmed mean inflation remained low in July, undershooting the ABS measure.<\/p>\n

\"Quarterly<\/p>\n

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On Fabo\u2019s preferred standardised basis, the MI gauge continued to be \u201ca bit softer\u201d than the official ABS quarterly trimmed mean inflation.<\/p>\n

\"Quarterly<\/p>\n

With inflation seemingly benign, the Reserve Bank of Australia (RBA) is almost certain to cut the official cash rate (OCR) by 0.25% at next week\u2019s monetary policy meeting.<\/p>\n

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Financial markets have ascribed a 98% likelihood of a cut next week and anticipate two more reductions by early next year.<\/p>\n

\"RBA<\/p>\n

However, a growing number of economists are less optimistic and believe that the RBA is close to the end<\/a> of its rate-cutting cycle.<\/p>\n

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Former RBA executive turned chief economist at Challenger, Jonathan Kearns, believes that the RBA will deliver only two more rate cuts at its August and November meetings.<\/p>\n

\u201cThe RBA will be very cautious, and indicate that as they\u2019re getting closer to a neutral setting, and that it\u2019s not appropriate to be cutting at a rapid rate\u201d, Kearns noted pointing to the resilient labour market.<\/p>\n

\u201cWe\u2019re much more likely to see two cuts this year than three cuts, which the market has been pricing\u201d.<\/p>\n

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Barrenjoey chief rates strategist Andrew Lilley agrees with Kearns\u2019 assessment that there could be fewer cuts.<\/p>\n

\u201cThe RBA will be completely unperturbed by a slow loosening of the labour market, particularly if it\u2019s coming with no loss of jobs, which is what we\u2019ve had so far\u201d, he said.<\/p>\n

CBA economist Lucinda Jerogin argued that \u201cit would take a considerable weakening in the economic data, particularly the labour market through a meaningful lift in the unemployment rate, to consider the meeting on September 29-30 \u2018live\u2019\u201d.<\/p>\n

The future path of rate cuts will hinge greatly on the labour market.<\/p>\n

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Around 80% of the nation\u2019s job growth over the past two years has come from the non-market (government-aligned) sector, principally via the expansion of the NDIS.<\/p>\n

\"Filled<\/p>\n

The market (private) sector, meanwhile, has experienced recession-like conditions and barely any job growth.<\/p>\n

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\"Market<\/p>\n

With federal and state budgets under pressure and seeking to cut costs, the RBA is anticipating a smooth handover from government-funded job creation to private sector job creation.<\/p>\n

There is a strong likelihood that this handover does not occur smoothly, resulting in unemployment rising far above the RBA\u2019s expectations.<\/p>\n

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If this scenario plays out, then the RBA will cut rates harder than economists or the market are expecting.<\/p>\n","protected":false},"excerpt":{"rendered":"The news on inflation continues to improve, following the latest benign Q2 CPI print from the Australian Bureau…\n","protected":false},"author":2,"featured_media":45146,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64,63,99,164],"class_list":["post-45145","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-au","tag-australia","tag-business","tag-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/45145","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=45145"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/45145\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/45146"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=45145"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=45145"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=45145"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}