Reserve Bank of Australia Statement on Monetary Policy (SoMP).
- Board's priority is to return inflation to target
- Considered whether to pause in Nov, decided a hike would provide more assurance on inflation
- In hiking, judged risk of inflation staying higher for longer had increased
- Whether further tightening needed will depend on data, balance of risks
- Inflation more persistent than expected, economy a bit stronger than expected
- Potential for further upside surprises to inflation, from both domestic and external factors
- Some measures of inflation expectations edging up, important to stop this
- Board mindful that many households facing painful squeeze on budgets
- RBA raises forecasts for inflation and GDP growth, trims unemployment and wage forecasts
- Sees trimmed mean inflation at 4.5% end 2023, 3.25% end 2024, 3.0% end 2025
- Sees CPI at 4.5% end 2023, 3.5% end 2024, 3.0% end 2025
- Sees wage growth at 4.0% end 2023, 3.7% end 2024, 3.5% end 2025
- Sees unemployment at 3.75% end 2023, 4.25% end 2024, 4.25% end 2025
- Sees GDP growth at 1.5% end 2023, 2.0% end 2024, 2.25% end 2025
- Forecasts assume cash rate peaks around 4.5% before declining to 3.5% by end 2025
- Revises up population forecasts, assumes peak was 2.5% in q3 followed by decline to 1.5% avg
Headlines via Reuters.
Bolding above is mine. The Bank forecasts both headline and core inflation not returning to the band until the end of 2025. The bank, if you need a reminder is 2 to 3%. The December of 2025 forecast is 2.9%, which of course is the extreme top of the band. The earlier complacency of the RBA is biting them, and the Australian people.
Full text is here:
Statement on Monetary Policy November 2023
