The TD Securities – Melbourne Institute monthly inflation gauge for April was released this morning. It showed a rise of 0.3%, which is large, but the 12-month rate still came in at a very benign 1.4%, well below the RBA’s 2-3% target band.
Annette Beacher, chief Asia-Pacific macro strategist at TD Securities, said that there were mixed messages in the big monthly, yet still weak annual rate of inflation and highlighted a number of one-off factors which drove the monthly increase.
“For the RBA Board meeting tomorrow, the combination of sub-trend GDP growth, lower terms of trade and a low inflation environment all tilt the odds towards the RBA delivering a 25 basis point cut to 2 per cent,” she said.
Then, according to Beacher, on Friday the RBA can explain why it cut and flesh out its thinking on the future path of economic growth.
“We expect the sluggish outlook for non-mining activity to keep the RBA’s easing bias on the table for many months to come,” she said.