RBA: Policy bias remains neutral, forecasts not materially changed – Deutsche Bank

Phil Odonaghoe, Economist at Deutsche Bank, notes that the RBA’s November SMP contains few surprises as the Bank’s policy bias remains neutral.

Key Quotes

“The Bank notes that “there has been no material change to the forecast for underlying inflation, which is expected to remain around current rates in the near term, before gradually picking up to around 2 per cent by the end of the forecast period.” Similarly, “there has been little change to the aggregate growth forecasts. GDP growth is expected to be around potential in 2016/17 and gradually pick up thereafter to be between 3 and 4 per cent by the end of the forecast period.”

What is most notable, in our view, is the Bank’s commentary on housing. While the Bank has again acknowledged, as it did in the November post-meeting statement, that “housing prices are rising at a brisk rate in some locations”, it continues to strike a fairly balanced tone about the nature of risks in the housing market.

With the Bank’s underlying inflation forecasts essentially unchanged in the Statement relative to August, and as we noted in our write-up of the November post-meeting statement, we continue to think inflation will run a little lower than the Bank expects over 2017, with a mid-year rate cut in 2017 still more likely than not in our view.”