Westpac boss sees case for rate cuts after fall in inflation
After underlying inflation fell to a three-and-a-half-year low of 2.7 per cent on Wednesday, the boss of Australia's second-largest retail bank said the decline should reinforce the case for a rate cut next month.
Miller acknowledged a cut was not a sure thing, after the Reserve Bank shocked markets when it held rates this month, but he said markets had priced in roughly a 90 per cent chance of a cut in August.
Reflecting the views of market economists, Miller highlighted the positive move in the underlying inflation rate – known as the 'trimmed mean' – which excludes items with particularly big price changes.
'The trimmed mean is the one that I think we should all fixate on. The fact that it wasn't up probably is another data point that reinforces it is open to the Reserve Bank to cut rates,' Miller said at a Trans-Tasman Business Circle event in Sydney.
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At the same time, Miller still cautioned that the progress in dealing with inflationary challenges was 'not overwhelming', and he pointed out markets had been convinced there was a cut coming in July, only for the Reserve Bank to hold. He said the central bank remained focused on whether this was the right time to cut rates.
'It feels like there's even more evidence now that they should [cut rates], but I can't help but think that only four weeks ago, everyone was absolutely clear that there was a rate cut coming, and it didn't,' he said.
'I think we're lucky to have a Reserve Bank and a governor with that independence and that confidence to look after the country's long-term interests.'
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