RBA Revises Inflation Outlook: Policy Report

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RBA Revises Inflation Outlook: Policy Report
Credit: © Reuters.

By Oliver Gray 

Investing.com - The Reserve Bank of Australia noted in its February Monetary Policy Statement that the Australian economy bounced back strongly from the lockdowns associated with the outbreak of the Delta variant in the second half of 2021 and early signs indicate that the effect from the Omicron variant on spending has been relatively small. Meantime, the outlook for inflation has been revised higher amid a tighter labour market and strong demand conditions, while GDP is expected to have grown by 5% over the year.

According to the report, underlying inflation is forecast to peak around 3¼ per cent in the next few quarters and is expected to remain in the upper half of the Bank's inflation target range of 2 to 3 per cent before returning to around 2¾ per cent as some of the shorter-term cost pressures abate.

Reiterating comments made by RBA governor Philip Lowe earlier in the week, the quarterly statement judged it too early to conclude that inflation is sustainably in the two to three per cent target range.

"As the board has stated previously, it will not increase the cash rate until actual inflation is sustainably within the two to three per cent target range," the statement said.

Meantime, policymakers ceased further purchases under the bond purchase program after 10 February, after assessing the actions of other central banks, the functioning of Australia's bond market and progress towards policy goals. Officials also noted that ceasing purchases under the bond purchase program does not imply a near-term increase in interest rates, nor does it represent a tightening of monetary policy.

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