A slightly dovish tweak to the 2018 inflation outlook
But they also make a mention that they see inflation ticking higher and accelerating more than expected currently in 2019 and 2020. If anything, I'd expect that to balance each other out. This is what they have to say on inflation in the statement for this year:
In the interim, once-off declines in some administered prices in the September quarter are expected to result in headline inflation in 2018 being a little lower than earlier expected, at 1¾ per cent.
Apart from the inflation outlook, the RBA also tweaked its forecast for the unemployment rate to 5% although the key point is that they still acknowledge that wages are to remain low for quite a while yet.
The outlook for the labour market remains positive. The vacancy rate is high and other forward-looking indicators continue to point to solid growth in employment. Employment growth continues to be faster than growth in the working-age population. A further gradual decline in the unemployment rate is expected over the next couple of years to around 5 per cent.
This all points to some revisions in the forecasts to the statement on monetary policy (SoMP) that is due to be released on Friday (this was the previous SoMP). However, the key themes that are holding back the RBA from hiking rates remain in place and the minor tweaks here doesn't change that.
Aside from all of the changes above, the RBA also noted on the slowdown in the Chinese economy:
Growth in China has slowed a little, with the authorities easing policy while continuing to pay close attention to the risks in the financial sector.
They removed the part on risks to emerging markets and replaced it with the above. But yeah, essentially it's one in the same as what affects emerging markets more than anything else is China.
To sum up, expect tweaks in the SoMP on Friday and no cash rate changes are expected still in 2018 with the probability of one in 2019 very much uncertain at this point.
