While the latest Inflation reading coming out a tad higher than expected has led to headlines doubting back-to-back rate cuts, hopes of that happening were never all that high. Now the question is whether we should be bracing for fewer rate cuts than borrower’s hip pockets and our economy need?

The new way the Reserve Bank board decides on interest rates means they don’t meet monthly for most of the year. So, there’s no June meeting, which makes July the next opportunity to give the thumbs up to another cut. And because the monthly headline Consumer Price Index for April has come in at 2.4% rather than economists’ best guess of 2.3% (and the more important underlying reading that takes out volatile price moves was 2.8% compared to the March number of 2.6%), headlines have been negative on a July cut.

But in the ‘secret world’ of those statistical-driven killjoys called economists, this July rate cut was always seen as less likely than those predicted cuts for August or September, December and then next February. That said, as one of those practitioners of the dismal science called economics, I often wonder how my colleagues come out with these guesses!

Here's the reality on rate cuts as I see it:

1. If Donald Trump plays it crazy on tariffs and the world economy (including ours) is threatened with recession, we’ll see at least three or four more cuts over the next 12 months.
2. The flow of economic data for Australia will determine how many cuts are coming and when.
3. Two more cuts seem highly likely and August and December or February are my best guesses.
4. Economists such as David Bassanese from Betashares said the April CPI was only “mildly disappointing”.
5. Monthly CPIs aren’t as important as quarterly readings, and the June number comes in late July. This will be crucial for when the next cut is coming.
6. The small jump in the CPI is seen as seasonal. Travellers heading to Europe and other places are slugged with higher airfares as June to August attracts many tourists, who cop these higher fares. And often there are clothing price rises for pre-winter purchases.

I think this from the CBA economics team is more positive than I would’ve expected, so let me share with you their more optimistic forecast on rate cuts: “Commonwealth Bank (CBA) Group economists expect the RBA to deliver further 25 basis point rate cuts in August and September for an end year cash rate of 3.35%.”

The CBA team is more optimistic than me, and that seldom happens! Anyone really hoping for a lot of rate cuts is, by definition, also hoping for a recession and plenty of people out of work. I’m sure no one really wants that.