From 'The Australia' newspaper over the weekend (gated): Pundits misunderstand Reserve Bank's latest forecasts.
Its an opinion piece from David Uren (the paper's Economics Editor)
Says that in Friday's Statement on Monetary Policy the Bank has been misunderstood:
- with widespread commentary that cuts to inflation forecasts in Friday's statement on monetary policy marked a change in policy stance.
But, says Uren:
- However the Reserve Bank's own explanation on the opening page of its economic overview was that the inflation forecasts had been lowered to take account of the change in the Australian Bureau of Statistics' weighting of consumer spending when calculating the consumer price index.
- It added that this had not affected the bank's assessment of how inflationary pressures were likely to evolve.
Uren goes on:
- The point that Evans and other economists have right is that it is impossible to see the Reserve Bank raising rates while underlying inflation is materially below the bottom of its target band.
- the latest monetary policy statement gives no inkling that the Reserve Bank would be looking to cut
And, looking ahead:
- The upward trajectory in the Reserve Bank's inflation forecast is extremely gradual. It would not take much change in that trajectory for inflation to rise above 2 per cent considerably sooner than its current forecast.
For posts from Friday about the SoMP, and notable disagreement on its implications: