It will be fascinating to see how economists' August interest rate calls change following today's CPI release. A simple decision-rule: a core inflation print of 0.5% or higher and the RBA is likely to hold. Core of less than 0.5% and a cut is a possibility, but still not guaranteed. Here is the always thoughtful Goldman Sachs on Governor Stevens's landmark speech yesterday:
Today's speech was the final opportunity for the RBA to signal its intentions on policy prior to tomorrow's 2Q2012 CPI report and the August rates meeting. The conspicuous lack of discussion on the inflation front serves to reinforce our view that the central bank is not looking to use tomorrow's expected benign prices release as the catalyst for further policy easing. Indeed, arguably a rate cut at that meeting would stand somewhat at odds with today's quite upbeat assessment of the outlook by the Governor...With significant policy stimulus now working its way through the system and major tax reform only recently initiated, we think it will be some months before the RBA has a clean read on economic momentum
