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The RBA has dialled back its inflation forecasts

Friday, Nov 10 2017
The RBA has dialled back its inflation forecasts

The Reserve Bank of Australia (RBA) has just released its latest quarterly Statement on Monetary Policy (SoMP), including updated projections on GDP growth, inflation and unemployment over the next few years. The most noticeable tweak involves the bank’s underlying inflation forecasts, those which are of most importance on the outlook for interest rates, with the bank now forecasting that it will move back to the bottom of its 2-3% target range by the middle of 2019. Not in the target band, but at the bottom of the target band. In its previous forecasts, the midpoint had underlying inflation hitting 2% by the end of 2018 before moving back to 2.5% during 2019.

Based on these forecasts, the bank now thinks it will take longer for inflationary pressures to build.Outside of inflation, the board also tweaked its unemployment forecasts for the end of 2019. It now sees Australia’s unemployment rate sitting at 5.25% in two years time, below the 5.5% midpoint level offered in its previous forecasts. Although an upgrade, the outcome suggests wage pressures over the next couple of years — a key factor on the outlook for inflationary pressures — will remain weak.

More in this category: « Unemployment Claims rose to 239,000 French Industrial Production rose by 0.6% »

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