Australian Dollar suffers another round of selloff today after RBA revealed rather dovish economic forecasts in the Statement on Monetary Policy. In the summary part, Governor Philip Lowe’s “balanced” turn was echoed.
The first scenario is “further progress in reducing unemployment and bringing inflation into the target range can reasonably be expected.” In this case, higher interest rate “would become appropriate at some point”. However, in other scenarios, “If there were then to be a sustained increase in unemployment and a lack of progress in returning inflation to target, it might instead be appropriate to lower the cash rate.”
RBA now judges ” the probabilities of these two sets of scenarios have shifted to be more evenly balanced than previously.”
In the new economic projections:
- 2019 year-end growth was revised to 3%, down from 3.25%.
- 2020 year-end growth was revised to 2.75%, down from 3%.
- June 2020 unemployment rate was revised to 5%, up from 4.75%.
- That is, unemployment rate will fall at a slower pace.
- 2019 year-end CPI was revised to 1.75%, down from 2.25%.
- 2020 year-end CPI was unchanged at 2.25%.
- That is, CPI will rise at a slower pace.
