A week of surprises from the Reserve Bank

The odds of the Reserve Bank cutting the official cash rate to a record low of 2.0% have risen dramatically over the past week.  Not only did June quarter consumer price data show inflation languishing below the Bank’s most recent forecasts, but the sudden tightening of mortgage lending restrictions will afford the Bank more room to move without unduly inflaming house price growth.  If these factors weren’t enough, the Reserve Bank’s surprise economic update this morning gave a clear message to market participants that they should anticipate a cut on August 11.