The Reserve Bank of Australia's Statement on Monetary Policy (SoMP) sets out the Bank's assessment of current economic conditions, both domestic and international, along with the outlook for Australian inflation and output growth. A number of boxes on topics of special interest are also published. The Statement is issued four times a year.
Headlines via Reuters:
- Board expects rates will need to increase further
- Not on pre-set path, will hike in larger steps or pause if considered necessary
- Rates have already risen significantly, mindful policy operates with a lag
- Sees global growth slowing significantly, risks from synchronised central bank tightening
- Domestic effect of rising energy prices to be much greater than first assumed
- Retail gas and electricity prices seen rising 20-30% over 2023
- Cuts economic growth forecasts sees gdp dec 2022 2.9%, dec 2023 1.4%, dec 2024 1.6%
- Lifts inflation forecasts sees cpi dec 2022 8.0%, dec 2023 4.7%, dec 2024 3.2%
- Forecasts trimmed mean inflation dec 2022 6.5%, dec 2023 3.8%, dec 2024 3.2%
- Lifts unemployment forecasts sees dec 2022 3.4%, dec 2023 3.7%, dec 2024 4.3%
- Lifts wage growth forecasts sees dec 2022 3.1%, dec 2023 3.9%, dec 2024 3.9%
- Forecasts assume cash rate peaks around 3.5%, falls to 3.0% by end 2024
- Many uncertainties surrounding these forecasts, particularly on consumption
- Wage-, price-setting behaviour a material risk to inflation outlook
- Risks to china economy skewed to downside by zero-covid rules, property weakness
The trimmed mean CPI (i.e. the bank's indicator of core inflation) is not expected to be back in the target band over the horizon forecast. The RBA forecast it at 3.2% in December of 2024. More than two years away. And yet the Bank is slowing the pace of rate hikes.
The RBA has two jobs (3 if you count financial stability, and everyone does). One is holding inflation steady, the 2 to 3% band is this target. Te other is full employment. The Bank is forecasting a rise in the jobless rate, so perhaps the backing off on rate hikes is intended to slow the rise in unemployment. Tricky times for the Bank.
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