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RBA Downgrades Annual Inflation Forecast

The Reserve Bank has officially downgraded its 2018 inflation forecast, expecting core and underlying inflation to climb 1.75% by December – down from 2.25% and 2% [respectively] projected in May.

Beyond December, the RBA has kept its inflation outlook unchanged, forecasting core and underlying inflation to notch 2.25% mid-2020.

A drop in electricity prices across some Australian cities, coupled with reduced child care and other service prices are attributed for the near-term downgrade.

RBA Governor, Philip Lowe, claims a “further gradual decline” in Australia’s unemployment rate is expected over the next few years to  around 5%.

Unemployment is forecast to remain around 5.25% to June 2020, before dipping to 5% in December that year.

GDP growth has also been bumped up in Q2 2018 – notching 3% versus 2.75% previously projected.

The RBA has retained its stance for GDP growth to average 3.25% over the next two financial years, before slipping to around 3% in June 2020.

Concerning longer-term projection, underlying inflation is expected to climb, before to return to the bottom end of the RBA’s 2-3% target by 2020.

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