RBA revises downwards inflation outlook, concerned over strong Aussie

According to the latest Monetary Policy Statement, the Reserve Bank of Australia expected gross domestic product growth to be below trend until mid-2015, leaving its economic growth outlook largely intact, and noted that the recent declines in the local currency over the past few months is likely boost GDP marginally. The central bank reiterated its view that despite accommodative monetary-policy settings, the Australian economy continues to struggle to make a transition from the mining-sector dependent economy, as investment boom in the sector has been waning substantially. The RBA is holding interest rates at record low levels in attempt to stimulate demand in the economy and offset steep declines in resource investment. The RBA reiterated its stance that the most prudent course is likely to be a period of stable interest rates. Also, the central bank stressed once again its discontent with high levels of the Aussie Dollar, saying that recent drops have not made Australia more currency-competitive compared to other trading partners. Nevertheless, the bank hoped that US interest rates will eventually rise, which would put more downward pressure on the Australian Dollar. The RBA has also revised its inflation outlook, expecting consumer-price inflation at 1.75% this year, compared with the bank's last estimate of 2% in August. For the year ended June 2015, the central bank sees inflation in a range of 1.5%-2.5%, down from 1.75%-2.75%.