RBA holds but rate cut coming
The Reserve Bank has kept its powder dry and avoided a controversial pre-election rate cut, opting to hold the official cash rate at its record low of 1.5 per cent today.
Economists and financial markets had tipped the odds of a rate cut at roughly 50-50 after official figures last month showed inflation ground to a half in the March quarter.
The annualised inflation rate of 1.3 per cent, well below the RBA's target band of 2 to 3 per cent, proved insufficient to force Governor Philip Lowe's hand just 11 days out from the federal election.
It would have been only the third time in history the RBA moved the cash rate during an election. A rate cut would have been the RBA's first move in 32 months - the first since Governor Lowe took the helm from Glenn Stevens - and would have dealt a severe blow to the Coalition's message of strong economic management.
Most economists are expecting two more rate cuts this year to a new record low of 1 per cent.
"The flat CPI reading for the March quarter wasn't enough to drag interest rates lower, although the likelihood of a cash rate cut over coming months remains high," CoreLogic head of research Tim Lawless said.
"While inflation remains below the RBA's target range, labour markets generally remain relatively strong, supported by NSW and Victoria, and the decline in housing values has lost some speed over recent months."
REA Group chief economist Nerida Conisbee said a rate cut was likely before July, while Finder.com.au insights manager Graham Cooke said most experts saw the cash rate at 1 per cent before the end of the year.
Economists polled by the comparison site expect a cut if unemployment rises by 1.4 per cent, inflation falls by a further 1.1 per cent, wage growth falls by 1.2 per cent, house prices fall by a further 7.2 per cent or GDP falls by 1.2 per cent.
"It's clear that even a small change in the unemployment rate or a further drop in inflation could trigger a cut," Mr Cooke said.