RBA’s MPS: Trims GDP growth and inflation forecasts for end 2023

The Reserve Bank of Australia (RBA) released its quarterly Monetary Policy Statement (MPS) on Friday, suggesting a reduction in the central bank’s inflation and growth forecasts for this year.

Key takeaways

Some further tightening may be required

Board considered raising rates at aug meeting, decided stronger case was to hold steady

Risks around inflation are broadly balanced, but much depends on inflation expectations

Inflation is moving in the right direction, consistent with reaching target by late 2025

Policy has been tightened significantly, full impact has yet to be felt

Board mindful of lags in policy, painful financial squeeze on some households

Board keen to preserve gains made in labour market

Tightening could provide some further insurance against upside inflation risks

Trims GDP growth and inflation forecasts for end 2023, most others little changed

Forecasts gdp end 2023 0.9%, end 2024 1.6%, end 2025 2.3%

Forecasts trimmed mean inflation end 2023 3.9%, end 2024 3.1%, end 2025 2.8%

Forecasts CPI at end 2023 4.1%, end 2024 3.3%, end 2025 2.8%

Forecasts unemployment end 2023 3.9%, end 2024 4.4%, end 2025 4.5%,

Forecasts wage growth end 2023 4.1%, end 2024 3.8%, end 2025 3.6%

Forecasts assume cash rate of 4.25%, falling to 3.25% by end 2025

Global growth seen well below average over next two years

Outlook for china has been revised lower, a downside risk for export prices