RBA’s SoMP: If economy improves as expected, higher rates are appropriate

In its quarterly Statement on Monetary Policy (SoMP), the Reserve Bank of Australia (RBA) raises the inflation and growth forecasts for 2018.

Key Points:

Higher rates are likely to be appropriate at some point.

Lifts 2018 core inflation forecast to 2% from 1.75%.

GDP growth forecast of 3.25% by December 2018, 2019.

GDP growth forecast of 3% by mid-2020.

If the economy improves as expected, higher rates are appropriate.

A significant appreciation in AUD would dampen growth and inflation.

2018 unemployment rate forecast now at 5.5%, previously 5.25%.

The labour market will still have spare capacity by mid-2020.

Data implies economy currently growing around 2.75%.

Data revisions show more resilient household consumption, sees solid growth for Q1.

Economic growth for Q1 looks to have picked up, partly thanks to exports.