Australian Dollar recovers mildly after RBA left cash rate unchanged at 1.00% as widely expected. The accompanying statement is a tweaked a bit further to the dovish side. The central bank noted that “it is likely to take longer than earlier expected for inflation to return to 2 per cent.” Also, “it is reasonable to expect that an extended period of low interest rates will be required in Australia”. But overall, the statement doesn’t alter expectations for one more rate cut this year, probably another in the first half of next year depending on development.
On the economy, RBA acknowledged that growth has been “lower than earlier expected” in first half. The central scenario is for growth to be at around 2.50% over 2019 and 2.75 over 2020. Consumption remains the main domestic uncertainty. Unemployment rate is expected to “decline over the next couple of years to around 5 percent”. And RBA reiterated that “Australian economy can sustain lower rates of unemployment and underemployment.” Inflation is projected to stay a “a little under” 2% over 2020 and a little above 2% over 2021.
