The Reserve Bank of Australia kept its outlook for growth and inflation, but it cited the currency as a major source of uncertainty.
The economy is forecast to expand 2.5-3.5 percent through December 2017, before improving to 3-4 percent in December 2018, the bank said in its quarterly Statement on Monetary Policy, released Friday.
The RBA observed that the economy grew more than estimates of potential over the year to March 2016 largely due to a significant expansion in resource exports.
The bank said the key source of uncertainty for the forecasts continues to be the outlook for the Chinese economy and other geopolitical and economic risks.
It is an unusual development that the bank made no significant changes to the forecast after the interest rate cut earlier this week, Bill Evans at Westpac, said.
Even though the forecasts have not been changed the implication is a more cautious view than seen in May, he noted.
The June quarter underlying inflation outcome was broadly in line with expectations at the time of the May Statement. Inflation will remain around 1.5 to 2.5 percent in the year ended December 2017 and through December 2018, RBA said.
Although the bank suggested that it has not got much appetite for cutting rates below 1.5 percent, inflation forecasts suggest it might have to, Paul Dales at Capital Economics, said. The economist expects rates to fall to 1 percent next year.
The bank had reduced rates twice this year by 25 basis point each in May and this month.
A decline in employment growth over 2016 was expected, the bank noted. The labor market forecasts are little changed from the May Statement.
by RTT Staff Writer
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