RBA SoMP: Growth and inflation forecasts cut – Westpac


Bill Evans, analyst at Westpac, notes that the RBA has cut its forecasts for growth and inflation to barely acceptable levels despite assuming two rate cuts as per market pricing in its May Statement on Monetary Policy (SMP).

Key Quotes

“GDP growth (to one decimal point) is now forecast at 2.6% for 2019 and 2.7% for 2020. That compares with 3.0% and 2.7% in the February Statement on Monetary Policy. The main explanations for the growth reductions for 2019 are consumption (2% down from 2.5%) and dwelling investment (–6.7% down from –4.5%).”

“As revealed in the Governor’s decision statement following the May Board meeting, the underlying inflation forecasts (trimmed mean) have been reduced from 2.0% for 2019 in the February SMP to 1.75% in May and the 2020 forecast reduced from 2.25% to 2.0%.”

“The forecast for the unemployment rate has been slightly increased, with the 5% unemployment rate still expected to hold through 2019 but the fall to 4.75% pushed back from December 2020 to June 2021.”

“Today’s SMP emphasises that the RBA thinks it’s highly likely that it will need to follow market pricing with two rate cuts. Westpac concurs with the market’s August timing for the first cut but expects that the second cut will occur in November – well before the timing implied by market pricing of a full cut by May 2020.”

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Feed news

Latest Forex News


Latest Forex News

Editors’ Picks

EUR/USD consolidating at lows after mixed US data, Powell

EUR/USD trades near a fresh two-month low of 1.1671 after mixed US Markit PMIs, which anyway indicated economic expansion. Fed speakers highlighted the need for more fiscal stimulus.

EUR/USD News

GBP/USD holds on to daily gains amid Brexit’s optimism

The GBP/USD pair consolidates around 1.2750, underpinned by EU Chief Brexit Negotiator Barnier's optimism on a post-Brexit trade deal. UK Business activity remains in expansion territory according to Markit.

GBP/USD News

Gold: Elliott Wave downside targets point to the $1767 area

The commodities complex is taking another hit on Wednesday after a tough start to the week. The recent persistent greenback strength has been a thorn in the side of the precious metal since the dollar consolidation began.

Gold News

In search of the Bitcoin anchorage

When the gates of heaven seemed to open, with the moon clearer than ever, selling came back to the crypto board. After the long winter of 2018/2019, hope was already exhausted, and the current setback is finishing with its remains. 

Read more

WTI flirts with the 200-day SMA below $40.00/bbl ahead of EIA

Prices of the WTI are alternating gains with losses below the key $40.00 mark per barrel on Wednesday.

Oil News

Forex MAJORS

Cryptocurrencies

Signatures