RBA Statement on Monetary Policy: trims GDP forecasts

Author: Eamonn Sheridan | Category: Central Banks

On Tuesday we got the latest monetary board policy decision from the RBA, where they cut the cash rate target from 2.25% to 2%

There was much wailing when the accompanying statement failed to provide much in the way of forward guidance. The Reserve Bank of Australia doesn't usually provide much at a meeting where they change rates though.

So what does today's Statement on Monetary Policy (SOMP) have to say?

  • Says latest rate cut to reinforce "encouraging trends" in consumer demand
  • Will assess outlook, adjust policy as needed for growth, inflation
  • AUD not offering enough support to economy, further fall seen likely and necessary
  • Economy to grow below trend for a little longer than expected, pick up in 2016/17

  • Trims GDP forecasts around 0.25 ppt, 2015 yr avg seen at 2.25 pct, 2016 at 2.5-3.5 pct

  • Underlying inflation seen 2.5 pct at end 2015, 1.75-2.75 pct for end 2016 and mid 2017

  • Non-mining investment not likely to pick up in coming quarters as had been expected

  • Unemployment rate seen peaking at 6.5 pct in mid-2016, stay elevated for longer

  • Spare capacity in labour market to last longer than previously thought

  • Expects wage growth to stay contained, but not fall below inflation

  • Home price growth strong in Sydney but slowing elsewhere, credit has levelled out

Quick Headlines via Reuters 

The Statement suggests an easing bias, how could it not?

Depressing reading.
 It seems the RBA solution for "Non-mining investment not likely to pick up in coming quarters as had been expected" is to instead "latest rate cut to reinforce "encouraging trends" in consumer demand". Over to you, consumers .... please spend.

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The Statement on Monetary Policy sets out the Bank's assessment of current economic conditions, both domestic and international, along with the outlook for Australian inflation and output growth. A number of boxes on topics of special interest are also published. The Statement is issued four times a year.

Here is the full text of today's release.

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