The Reserve Bank of Australia lowered its inflation outlook in the May Statement on Monetary Policy (SoMP). This signals that there is a likelihood that the central bank will further lower rate in near-term, noted ANZ. The RBA downgraded its 2016 inflation outlook by one percentage point to 1%-2% from its earlier projection of 2%-3%. The inflation figure for the first quarter was weak.
The central bank lowered its outlook significantly because the expectations of wages growth was downgraded and also due to rise in retail competition and easing housing costs, said ANZ. This major downgrade to the outlook of inflation implies that the central bank will further ease policy.
“We now expect another 25bp cut, most likely in August, but the possibility of a cut as early as June shouldn’t be discounted”, added ANZ.
Meanwhile, the RBA has maintained its forecast elsewhere. The near-term economic growth outlook was upwardly revised due to the strong GDP figures for the fourth quarter; however, the numbers have been maintained since 16 December. The central bank also kept the projections of jobless rate unchanged.
The material has been provided by InstaForex Company – www.instaforex.com