In­fla­tion to re­main low un­til late 2019: RBA

Weekend Gold Coast Bulletin - - BUSINESS - JOHN DAGGE

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.

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