Not so lucky today for my pal Stephen Koukoulos, but there are many more months to go until June 2012, when this great bear of a man projects the RBA's cash rate will be 3.5%. SK forecast an October cut and got that wrong. He is now expecting, on the record, two RBA cuts (or 50bps) in November. I was not banking on any change this month. More significantly, I was expecting the RBA to make mention of the stimulatory effects of the decline in the exchange rate, and the reduction in the price of fixed-rate loans (as I anticipated in my Property Observer/Business Spectator column this morning). And the RBA very much obliged, commenting:
"The Board noted that financial conditions have been easing somewhat, with interest rates for some housing and business loans declining slightly due to increased competition and the fall in some funding costs in financial markets. The exchange rate has also declined from the very high levels of a few months ago."
A great deal now hinges on the Q3 CPI figures, which we get later this month. They will tell us whether the inflation pulse is quickening, or relaxing as the RBA and all of us, at the end of the day, hope (nobody really wants an inflation problem!). A very high core CPI print in Q3 would mean that hikes come back on the table. A very low print, on the other hand, would remove any meaningful obstacles to the RBA paring rates back a bit, "should that prove necessary". The latter being the RBA's crucial caveat that it attached to the possibility of "monetary policy [providing] some support to demand". Aka central banker speak for cuts.
