RBA governor Bullock: If inflation falls more quickly than forecast, we can respond

• We are aiming for inflation at 2.5%
• As long as inflation continues on its gradual slowing path, we will be in position to consider cutting rates at some point
• We don’t need inflation to be at target to cut rates
• But we need to be sure it is heading there
• If inflation picks up again, that would be a big red flag for us
• We can hold rates where they are for now in waiting for inflation to slow further

Both the RBA and markets in general will be waiting for evidence of this before really considering any rate cut pricing. As things stand, markets are seeing the first full 25 bps rate cut only in May. The odds of a rate cut in December and February at this point are pretty much nil.

This article was written by Justin Low at www.forexlive.com.