PPI figures could lead to interest rate cuts

The Reserve Bank of Australia (RBA) recently suggested it would make further cuts to interest rates depending on inflation figures.

According to the Australian Bureau of Statistics, the producer price index (PPI) fell by 0.3 per cent in the March quarter, which was far lower than most economists had been predicting.

The news could now pave the way for the RBA to readjust the national cash rate as early as next week.

Many businesses and trade unions had been urging the organisation to take action, as companies throughout Australia were being blighted by the high value of the dollar.

Last week, prime minister Julia Gillard said the RBA would be in a strong position to sanction further reductions if the country achieved a surplus on its budget.

Chief economist at HSBC Australia Paul Bloxham believes that consumer price index statistics – which are set to be released tomorrow (April 24th) – will be a key factor.

"The bottom line is, will inflation be low enough to see the RBA cutting rates next week and we see the PPI as evidence that it's likely," he remarked.

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