Australia’s central bank cuts growth and inflation forecasts on housing risks
The Reserve Bank of Australia (RBA) has cut growth and inflation forecasts on consumption and housing risks.
The RBA’s cut in growth and inflation forecasts is in response to weaker consumption and slumping property prices.
In its quarterly update of forecasts, the RBA cut economic growth in the year to June 2019 to 2.5% from 3.25% and by half a percentage point in the following year.
According to the statement of monetary policy released on Friday the RBA said, ‘The board has paid close attention to developments in the housing market and the implications that lower prices might have for construction activity and households’ spending decisions.’
The board said, they considered how the prospects for consumption growth would be affected if household income growth was to worsen.
The RBA predicts consumption growth to be 2.75% rather than the 3% earlier estimated.
According to the monetary statement, GDP growth forecasts is three-quarters of a percentage point lower than previously expected.
The forecasts also show core inflation reaching 2% at the end of this year and headline inflation reaching there in mid-2020.
According to the RBA’s statement, headline inflation is predicted to slump to 1.25 % in the year through June tdue to lower oil prices.
The Australian dollar falls in response
The Australian dollar fell as the statement was released. AUD/USD fell to $70.66 at time of writing, falling from $70.96 before the report.
IG market analyst, Kyle Rodda said, yield differentials and technicals suggest $0.7040/50 is next to support as 10 Year ACGB yields fell to 2.07%, their lowest since September 2016.
Mr. Rodda said the ASX was flat for the day as a result.
Traders were betting on an interest-rate cut by November, with futures data now showing a 90% chance.
It comes after governor Philip Lowe this week said he sees the chances of an interest-rate as “more evenly balanced.”
Analysts say the RBA’s change in stance is due to weaker data over the past few months, which is also connected to the falling housing market.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
Please see important Research Disclaimer.
Start trading forex today
Trade the largest and most volatile financial market in the world.
- Spreads start at just 0.6 points on EUR/USD
- Analyse market movements with our essential selection of charts
- Speculate from a range of platforms, including on mobile
Live prices on most popular markets
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.