RBA revised its growth and inflation outlook following interest rate cut by 25 basis points

Source: Dukascopy Bank SA
"Growth is now expected to remain below trend over the course of this year and then to pick up to an above-trend pace in the latter part of the forecast period, in response to rapid growth in LNG exports and the lower exchange rate and interest rates"
-Reserve Bank of Australia


The Reserve Bank of Australia revised its growth and inflation outlook for 2015, following its decision to cut the official cash rate by 25 basis points a day earlier, bringing it no a new record low of 2.25%. The central bank now expects the Australia economy to grow at 2.75% in the year ending June 2015, down from the previous estimate of 3%, but the bank hopes that lower interest rates as well as weakening Aussie Dollar will boost demand and growth into 2016 and 2017. For the December 2015 year, the bank cut its GDP projection to 2.25-3.25% down from 2.5-3.5%. The lower end of the December 2016 growth forecast was upgraded slightly to between 3% and 4% from November's forecast of between 2.75% to 4.25%.

Additionally, the RBA downgraded its inflation forecasts amid the effects of a sharp plunge in oil prices and the weaker outlook for labour and product markets. The annual change in consumer prices was cut from 1.5-2.5% in the year ending June 2015 to 1.25%, and from 2.5-3.5% in the year ended December 2015 to 2-3%. The Australian jobless rate, meanwhile, is seen rising further in the observable future to around 6.5%. The central bank reiterated its stance that the Australian Dollar is still overvalued, and said a further decline in the nation's currency could further support the Australian growth.


© Dukascopy Bank SA

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