50-50 bet ... will Reserve Bank of Australia (RBA) Governor Glenn Stevens cut rates in May? Source: News Limited

The reason there’s less chance is new figures show prices are rising slightly quicker than expected.

The Reserve Bank of Australia has, among its goals, a desire to keep inflation between 2 and 3 per cent. And, with the latest Australian Bureau of Statistics’ Consumer Price Index putting inflation at just 1.3 per cent — the lowest level in nearly three years — it would initially appear there is no prices-related impediment to a further rate cut on Tuesday week.

But the RBA does not really look at that headline rate, instead preferring “underlying” measures, which averaged 2.4 per cent in the ABS report — higher than most economists forecast.

“The underlying measures were a little stronger than was expected,” said HSBC chief economist Paul Bloxham. “Add this to the recent upside surprises in the employment and retail sales data, as well as the still booming Sydney housing market, and the case for a near-term cut in the cash rate is weakened. Reflecting this, the market is now pricing a 50:50 chance of a cut in May.”

Staying put ... Macquarie senior economist James McIntyre predicts Governor Glenn Stevens will hold fire. Source: AP

Mr Bloxham is still predicting the RBA will pull the trigger next month, reducing the cash rate to 2 per cent, as it seeks to spur economic growth.

CommSec economist Savanth Sebastian also anticipates a 0.25 percentage point drop on Tuesday.

“Despite the mildly higher than expected readings on underlying measures, the Reserve Bank can comfortably ignore inflation and discuss merits of another interest rate cut on the economy,” Mr Sebastian said. “Policymakers will focus more attention on the labour market, shifts in the Aussie dollar and retail activity in coming months.”

Macquarie senior economist James McIntyre predicts Governor Glenn Stevens and his board will hold fire.

“Rates are still headed lower, just later,” Mr McIntyre said. “After the March RBA board meeting we shifted our forecast rate cut out to August, and added a second rate cut in November. We see no reason to shift that view based on the CPI data.”

The inflation gauge showed that during the three months to the end of March, the most significant price rises were for holiday travel and accommodation, up 3.5 per cent, tertiary education, which rose 5.7 per cent, and medical and hospital services, increasing 2.2 per cent. These rises were partially offset by an average 12.2 per cent fall in the cost of fuel and an 8 per cent drop in fruit prices.