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CPI paves path for rate cut

Figures relating to the Consumer Price Index for the December quarter have paved the way for the RBA to cut interest rates in February, the Housing Industry Association (HIA) has claimed.

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Figures relating to the Consumer Price Index for the December quarter have paved the way for the RBA to cut interest rates in February, the Housing Industry Association (HIA) has claimed.

According to HIA senior economist Andrew Harvey, while the CPI remained relatively unchanged over the December 2011 quarter, further analysis of the more closely-dissected 'weighted median' showed room for another rate cut.

"The December quarter headline inflation result shows that prices were flat over the past three months, while the more closely-watched weighted median came in at 0.5 per cent, leaving annual underlying inflation at 2.6 per cent.

"This is well within the Reserve Bank's inflation target band and leaves the RBA with plenty of space to cut the official cash rate at the next meeting on the 7th of February," he said.

"In light of continuing global uncertainty and some fragility in the non-mining sectors of our own economy, there should be no question as to a rate cut in February. It's the only prudent course of action, as is the banks passing on any rate cut in full."

 


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