Summary of main points:
- Raises GDP growth and inflation forecasts after the AUD decline
- Period of stability in rates likely given current outlook on prices, activity
- Further signs very stimulatory policy working
- Sees underlying inflation near top of band by mid-2014 before slowing toward 2.5%
- Forecasts GDP growth 2.75% mid-2014, 2.25-3.25 end 2014, 3-4 end 2015, 3-4.5 mid-2016
- Forecasts underlying inflation at 3% mid-2014, 2.25-3.25 to mid-2015, 2-3 pct after
- Inflation to ease later in 2014 given slow wage growth, limited domestic cost pressure
- Reasons for pick up in inflation unclear, could be AUD, wider margins, statistical “noise”
- Lower AUD could add around 0.5% to underlying inflation in both 2014 and 2015
- AUD is around 12% lower than in May 2013, if sustained that would add to growth over 2014
- RBA sees pick up in home building, consumer spending, business sentiment
- Unemployment rate to edge higher over coming year, begin to decline in 2015
- Mining investment still expected to decline rapidly over next few years
- Rising resource export volumes to add significantly to growth, LNG to boost GDP from 2015116
- The outlook for Australian government spending is very weak for next few years
- The risks to global economic outlook are balanced, some upside for US. and downside for Europe
Full text here: Statement on Monetary Policy February 2014
Headlines via Reuters
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AUD jumped 20-odd points but is trapped underneath sellers around 0.8975 and above. With the NFP report due from the US tonight it is unlikely to head up to 0.9000 beforehand and appears trapped between order levels for now (orderboard here).
