Reserve Bank of Australia Statement on Monetary Policy August 2018

RBA Quarterly statement

  • Board sees no strong case for near-term move in rates
  • Higher rates likely to be appropriate at some point if economy evolves as expected
  • Says steady monetary policy promoting stability and confidence
  • Decline in AUD due to USD strength would be positive for growth and inflation
  • Economy will not face broad-based capacity constraints for "some time"
  • RBA forecasts GDP growth of 3.25 pct for Dec 2018 and Dec 2019, 3 pct for Dec 2020
  • Forecasts unemployment at 5.5 pct Dec 2018, 5.25 pct Dec 2019, 5 pct Dec 2020
  • RBA trims underlying inflation forecast to 1.75 pct Dec 2018, sees 2 pct Dec 2019, 2.25 pct Dec 2020
  • Says CPI growth likely to be "quite low" in Q3 due to one-off policy changes
  • GDP growth looks to have remained solid in Q2, y/y rate to remain above trend
  • Says rising resource exports to add to growth over next two years
  • Revised forecast for terms of trade higher due to coal prices
  • Rural exports likely to be softer in second half of 2018 due to drought
  • Govt budgets suggest public investment to continue supporting growth
  • Sydney and Melbourne housing markets easing, but price declines modest so far
  • Average rates paid across all mortgages have drifted down over past year
  • Says global economic growth solid, outlook still positive
  • Says risks to global growth from trade protectionism have increased

Quick headlines via Reuters

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While adjustments to forecasts are not large, here they are...

For GDP, RBA have raised their (year average) forecast for 2018 to 3.25% from 3%

  • and GDP for June 2019 raised to 3.5 from 3.25

For inflation, 2018 CPI and underlying CPI cut to 1.75% each, from 2.25% and 2.00% respectively

  • and inflation CPI forecast, June 2019 forecast cut to 2% from 2.25%

No change to unemployment forecasts

OK … so in brief the RBA is

  • Looking for economic growth to pick up a little further
  • Looking for inflation to miss target for 2018 but to get back to it in 2019
  • Looking for unemployment to fall toward 5%

I do not think that the trimming in inflation forecasts from the Bank for this year will move them much towards being more dovish given they expect it to pick up again in 2019. Still, this is something to take note of and file away in the back of your mind if CPI data continues to come in soft.

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Full text is here: Statement on Monetary Policy- August 2018

Dunno WTF the AUD is doing (well, I do, in a nutshell, nothing) … looks like maybe TGIFfever has hit the market?

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