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Official interest rates may fall by Christmas
A cut in official interest rates by the end of the year is a real prospect if tomorrow's consumer price index (CPI) data for the June quarter surprise on the low side.
The producer price index (PPI) at the final stage of production rose only 1 per cent in the June quarter, for an annual rise of 4.7 per cent, the Australian Bureau of Statistics said yesterday.
The result was well below market expectations of a 1.6 per cent rise in the quarter and an annual rate of 5.3 per cent and it seems the June quarter CPI data could also be lower than currently expected.
But if Reserve Bank starts cutting official interest rates within a few months and trading banks don’t cut their rates with the same enthusiasm they have shown for raising them over the past 12 months, what happens then?
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