Australian Inflation Data Comes In Weaker Than Expected:

The Australian stock markets ended flat after the inflation data came in weaker than most of the expectations. So, most of the analysts are expecting a rate cut by the Reserve Bank of Australia on the back of this inflation data.

According to the Australian Bureau of Statistics, in the December quarter, the key measure for inflation in Australia which is the consumer price index (CPI) rose by a mere 0.2 percent. Analysts, on an average, expected the inflation figure to raise by 0.5 percent in this December quarter.

Savanth Sebastian, CommSec economist said, “It highlights that inflation is well and truly contained. It leaves the RBA decision in February open, as they have the opportunity to cut rates if they deem it necessary. Now comes down to whether they think the Australian economy is improving at a healthy rate.”

This analyst feels that the Reserve Bank of Australia has less need to cut the interest rates going forward. He also feels that the Australian economy is growing and is growing at a fast pace.

Stephen Walters, JP Morgan Australia chief economist said, “On the back of these numbers the odds of a rate cut have gone up a little bit. It\’s not enough to argue that the RBA has to cut the cash rate at the first opportunity, but if they think it is necessary, which is debatable, then they have certainly got an excuse with this inflation data.” However, this analyst feels that the Reserve Bank of Australia will have to cut the rates in its meet in February.

There is also debt ceiling meet which will be held later this day in the United States and investors should also watch out for that as this will have good impact on the share markets. Analysts feel that the President will give more clarity on the Fiscal Deficit and the Debt ceiling.

Su-Lin Ong, RBC Capital Markets senior economist, said, “We think maybe they will wait for a bit more data, given they cut by 50 basis points late last year. But these figures clearly give the RBA scope for further interest rate cuts if growth disappoints, which we think it will.”

This analyst thinks that the RBA will wait for more data to decide on what to do with the rates. So, all together, we are getting mixed reports from analysts on what the RBA will do in the February meet.

Stocks to watch out for:

BHP Billiton is in the news today after the company raised its production guidance for the first half of this financial year. The iron ore production also is rising for the company and this rise is higher than the market expectations. The shares of BHP soared after this news and closed around 1.2 percent higher at 37.02 dollars per share.

Boral is also in the news after the company raised its forecast for the first half of the financial year and this is on the back of improved cost saving strategies and improvement in its product portfolio. The shares of the company closed up 0.62 percent at 8.54 dollars per share.

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Category: Finances
Keywords: Dow Jones, United States, ASX, Dollar index, Brent Oil, Unilever, BHP Billiton, Boral, Earnings