The Reserve Bank Board next meets on March 6 and in a speech on February 8 the Governor concluded, “the Reserve Bank Board does not see a strong case for a near-term adjustment in monetary policy”, notes Bill Evans, Research Analyst at Westpac.
“Through 2017 Westpac has argued for rates to remain steady in 2017–2019. The Bank expects to make some progress in reducing unemployment and having inflation return to the midpoint of the target range. However, based on its recent forecasts that were released on February 9 that progress is expected to be painfully slow. Underlying inflation is expected to reach only 2%, the bottom of target range, through 2019 and the unemployment rate is expected to fall from 5.5% to 5.25% (compared to an estimated full employment rate of 5.0%) by end 2019.”
“While we are less optimistic about the unemployment rate and the growth outlook the Bank’s forecasts are not entirely out of line with our own view and, arguably, consistent with steady rates over the next few years.”