The Statement on Monetary Policy (SoMP) is released each quarter and it is closely watched for updates to the RBA’s own forecasts. In the November SoMP, the opening statement of the “Outlook” section stated “Domestic economic conditions have been a bit stronger than were expected in August”. In February’s SoMP, the sentence was changed to “have been a bit softer than were expected” and, in May this was modified to “was weaker over 2018 than expected…” In this latest SoMP, the Outlook section starts with the statement, “Domestic economic growth in the first half of the year was a little lower than expected…”
Consequently, the RBA has reduced calendar-year 2019 GDP and underlying inflation forecasts and at the same time it has increased unemployment forecasts out to June 2021.
The RBA’s inflation forecasts were flagged in the statement which accompanied the August meeting’s monetary policy decision where Philip Lowe stated “it is likely to take longer than earlier expected for inflation to return to 2%. In both headline and underlying terms, inflation is expected to be a little under 2% over 2020 and a little above 2% over 2021.”