RBA releases its statement on monetary policy - 4 May 2018
- Lifts 2018 core inflation forecast to 2% from 1.75%
- GDP growth forecast of 3.25% by December 2018, 2019
- GDP growth forecast of 3% by mid-2020
- If economy improves as expected, higher rates are appropriate
- A significant appreciation in AUD would dampen growth and inflation
- 2018 unemployment rate forecast now at 5.5%, previously 5.25%
- Labour market will still have spare capacity by mid-2020
- Data implies economy currently growing around 2.75%
- Data revisions show more resilient household consumption, sees solid growth for Q1
- Economic growth for Q1 looks to have picked up, partly thanks to exports
- Significant escalation of trade protectionism could derail global growth
That is an upwards revision to the core inflation forecast. The aussie is marked higher as a result.
The knee-jerk reaction in the aussie is from the more upbeat outlook, but that is very much expected after the statement released on Tuesday after its monetary policy meeting. As mentioned earlier, the focus will be on that inflation forecast and the RBA now sees core inflation meeting the lower end of its target 2% to 3% band this year.
But if anything, that still doesn't warrant a rate hike just yet. Though it is a step in the right direction. And the RBA seems a bit more confident with regards to growth and consumption, so that's a plus point too.
AUD/USD up to a high of 0.7553 from the release, previously sitting near 0.7538. A minor jolt, but we could see more follow through later in the day depending on the dollar's performance ahead of the US jobs report.