RBA lowers growth and inflation forecasts

The Reserve Bank of Australia’s board lowered its inflation and growth forecasts after its policy meeting today (August 6).

The RBA’s governor said the board would cut rates further if needed, as the board kept rates unchanged at the lowest-ever level of 1%. The RBA board made two consecutive 25-basis point rate cuts in June and July.

Governor Philip Lowe confirmed monetary policy will remain accommodative for “an extended period”.

“The board will continue to monitor developments in the labour market closely, and ease monetary policy further if needed, to support sustainable growth in the economy and the achievement of the inflation target over time,” said Lowe.

The RBA’s policy statement said “increased uncertainty caused by trade and technology disputes between the US and China was affecting investment”.

As a result, it expects Australian GDP to expand by 2.5% in 2019, down from 2.75% in its May forecasts. The RBA’s central scenario remains for inflation to increase gradually, “but it is likely to take longer than earlier expected for inflation to return to 2%”, it says.

“The recent inflation data were broadly as expected and confirmed that inflation pressures remain subdued across much of the economy,” the RBA statement said. In the year to June 30, inflation rose by 1.6%.