RBA SoMP: Faster inflation slowdown in 2023, but not after

In the quarterly Statement on Monetary Policy, RBA reiterated that “some further tightening of monetary policy may be required” to ensure that inflation returns to target in a “reasonable timeframe”. But that will depend upon “how the economy and inflation evolve.”

The new economic projections show both headline and trimmed mean inflation slowing more rapidly in 2023. However, both measures are only expected to reach the top of target range by mid-2025. Additionally, the central bank downgraded its GDP growth forecasts for 2023 and predicts a higher unemployment rate. The evolving economic landscape will be key in determining the RBA’s future policy moves.

Year-average GDP growth forecast:

• 2023 at 1.75% (revised down from 2.25%).
• 2024 at 1.50% (unchanged).

Unemployment rate forecast:

• Dec 2023 at 4.00% (revised up from 3.75%).
• Dec 2024 at 4.50% (revised up from 4.25%).

Headline CPI forecast:

• Dec 2023 at 4.50% (revised down from 4.75%).
• Dec 2024 at 3.25% (unchanged).
• Jun 2025 at 3.00% (unchanged).

Trimmed mean CPI forecast:

• Dec 2023 at 4.00% (revised down from 4.25%).
• Dec 2024 at 3.00% (unchanged).
• Jun 2025 at 3.00% (unchanged).

Full RBA SoMP here