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Inflation will now not fall into its target range until 2025, according to the RBA’s monetary policy statement.
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RBA revises up inflation number in February forecast
10 February 2023
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The RBA has revised up its inflation number in the February forecast with it to be at 4.8 per cent by the end of the year.
The amended forecast raised the headline inflation number from 4.7 per cent to 4.8 per cent by December, while it also increased the trimmed mean inflation in December to 4.3 per cent up from 3.8 per cent.
The changed prediction came after the trimmed mean inflation for December 2022 was at 6.9 per cent, significantly higher than the bank’s forecast of 6.5 per cent.
The revised forecast now showed the nation’s inflation levels not making it back down to the RBA’s target levels of between two to three per cent until 2025.
The RBA’s adapted projection also indicated significant wage growth was putting pressure on inflation, further propping it up, with the wage price index expected to reach 4.2 per cent by December, up from 3.9 per cent previously.
“Domestically sourced inflation and wages growth are both picking up,” said the RBA.
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“Given the importance of avoiding a price-wage [sic] spiral, the board will continue to pay close attention to both the price-setting behaviour of firms and the evolution of labour costs in the period ahead.”
Following its ninth consecutive interest rate rise the RBA said the increased inflation guidelines meant additional interest rate increases were likely to occur in the coming months.
“The board expects that further increases in interest rates will be needed to ensure that the current period of high inflation is only temporary,” said the RBA in its monetary policy statement.
“In assessing how much further interest rates need to increase, the board will be paying close attention to developments in the global economy, trends in household spending and the outlook for inflation and the labour market.”
The RBA’s forecast also had Australia’s GDP dropping to as low as 1.4 per cent in June 2024 before beginning its rise from there.
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