Inflation to remain low until late 2019: RBA
THE Reserve Bank says inflation will remain lower for longer and will not hit its target range until the end of 2019.
In an update adding to the case that interest rates will be on hold for some time yet, the nation’s central bank now expects underlying inflation to remain steady at about 1.75 per cent until early 2019.
It should only increase to 2 per cent — the bottom end of its target range — by the end of that year. The forecast is provided in the latest edition of the RBA’s statement on monetary policy released yesterday.
It shows the RBA does not expect the inflation rate to hit its 2 per cent to 3 per cent target range — a point that would bolster the case for a rate rise — for more than two years.
“It adds up to rates being lower for longer,” AMP Capital chief economist Shane Oliver said. “There is a growing risk that rates will be on hold for well into 2019, although we do still think the next move will be up.”
In August, the RBA said it expected underlying inflation to reach about 2 per cent during the second half this year.
It would then increase to sit between its target range of 2 per cent to 3 per cent to 2019.
In its latest outlook, the RBA said it had lowered its inflation outlook in line with the Australian Bureau of Statistics revising the way it put together its consumer price index — the benchmark measurement for inflation.
The new index increases the weight given to education, childcare, rents and international travel and decreases the weight given to fuel, telecommunications and transport, among other changes.