May rate cut can’t be ruled out

There were two pieces of good economic news in March. First, GDP growth for the year to the December quarter 2015 was reported at 3%, the highest reading since the March quarter of 2014. The unemployment rate also fell, from 6% to 5.8%, despite a third successive month of only soft employment growth. Other labour market indicators, such as vacancies, suggest that continued improvement is likely. There is one other factor that could precipitate a further rate cut; suppose that we get a surprisingly low CPI inflation result at end-April. A May rate cut cannot be ruled out completely, although bear in mind that the first Tuesday in May has already been reserved for a different major economic event, namely the rescheduled Budget. My view is still that the RBA will keep rates on hold for the foreseeable future. Read the full update here: (VIEW LINK)