On the first Tuesday in August, the RBA cut the official cash rate to a record low of 1.50%. Why did they do it? And are there any more rate cuts to come? The RBA decision was almost entirely due to weak inflation. Late in July, the ABS reported that headline inflation came in at only 1.0% and underlying inflation 1.5%. Both measures are well below the RBA’s 2-3% inflation target. Following the rate cut, the RBA released its quarterly Statement on Monetary Policy which contained the bank’s updated forecasts for both growth and inflation. Real economic growth is forecast to be solid at around 3% but inflation is expected to remain below the mid-point of the target band until at least the end of 2018. What’s driving this trend in inflation? I detail a number of factors that have all come together to drive inflation lower in the article below.