Headlines from Forexlive on the RBA SoMP:
- Says accommodative policy appropriate, will continue to assess outlook
- Past fall in AUD to support economy in face of lower terms of trade
- Reasonable chance AUD to decline further once Federal Reserve raises US rates
- Trims GDP forecast to reflect slower population growth, seen rising above 3 pct in 2017
- Year average GDP seen 2-3 pct for 2015/16, 2.5-4 pct for 2016/17
- Sees underlying inflation 2-3 pct out to end 2017, up from 1.75-2.75 pct on lower AUD
- Recent data have been generally positive, but economy still faces some headwinds
- Lowers unemployment forecast, expects little change over next 18 months
- Still slack in labour market, but a little less than previously expected
- Subdued wages, slowing population growth may explain steady jobless rate
- Assumes annual population growth of 1.5 pct, from 1.75 pct previously
- Outlook for business investment weak, though surveys paint more positive picture
- Domestic inflationary pressures well contained, lower a$ to lift tradeable prices
- Home prices rising rapidly in Sydney and Melbourne, but growth weak elsewhere
- Risks in Chinese economy remain somewhat tilted to the downside
The big one is the forecast peak in the unemployment rate:
The unemployment rate is anticipated to be lower than previously forecast. In part, this reflects the generally better-than-expected labour market conditions of late. Moreover, the unemployment rate is expected to remain little changed from recent levels for some time. This is despite the change to the forecast for aggregate demand, which is likely to be broadly matched by lower growth of the economy’s productive capacity, owing to lower population growth. Accordingly, the unemployment 1 These assumptions have been developed by the Bank. Updated projections from the Department of Immigration and Border Protection have not yet been released. rate is now forecast to remain little changed over the next 18 months or so from recent levels, before declining over 2017.
That is delusional but enough to send the dollar up 30 pips.
