Rate cut hopes fading away

Retail sales rebounded in July and business investment plans surged to a record high, making big rate cut less likely.

“Rates over the medium term are going to need to go higher," said Michael Blythe, chief economist at Commonwealth Bank of Australia.

Markets now imply a mere 19 per cent chance of a 25 basis point rate cut next week, when the Reserve Bank of Australia meets. Last month, markets had fully priced in such a move.

Overall business investment grew 7.7 per cent in the March quarter, compared with an initially reported 3.4 per cent rise. Unemployment remains low at 5.1 per cent and household income growth has handily outstripped inflation, giving consumers the means to spend if they choose.

Source: The Age