Fall in inflation could prompt cut to 1.75%

We suspect that news of the sharp fall in underlying inflation in the first quarter will be enough to prompt the Reserve Bank of Australia to cut interest rates from 2.00% to 1.75% at its policy meeting on Tuesday 3rd May. But even if the Bank keeps rates on hold at 2.0% next week, we expect that it will have to address the issue of extremely low underlying inflation by cutting rates to 1.5% before too long.

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