Australia and Core Inflation

ASX Day Interbank Cash Rate Futures: Headline inflation was tricky enough — down 0.2 per cent, the first fall in seven years, according to Australian Broadcasting Corporation. But the breadth of the weakness and the steep decline in the RBA preferred measure, core inflation, turned an almost certain "hold" into a 50:50 proposition. Related Story: Australia joining low inflation world Related Story: No BS zone: Crib notes to help you cut through the budget spin Map: Australia Reserve Bank board members may well have thought Tuesday meeting would be pretty simple, right up to the point when the inflation figures dropped last week. The current betting, framed by the ASX 30 Day Interbank Cash Rate Futures, showed a dramatic shortening for a cut to 1.75 per cent at almost 60 per cent at the close of business on Friday night. External Link: Percentage probability of an RBA rate change The current board has shown a reluctance to cut in the past and governor Glenn Stevens constantly reminds anyone listening that the inflation band of 2 to 3 per cent has a degree of flexibility being "on average, over the course of the cycle". Economic growth does not argue for a cut, employment is strong and China has the appearance of regaining its mojo, which has translated in higher iron ore prices. Bloomberg survey of leading market economists found 10 of 24 thought a cut was likely. (news.financializer.com). As reported in the news.