Investing.com - The Reserve Bank of Australia on Friday changed growth and inflation forecasts slightlydespite a higher exchange rate, and said monetary policy will remain accommodative for an extended period.
The inflation outlook suggests there is still space capacity in the economy and "given that assessment, the board's view is that the current accommodative monetary policy setting is likely to be appropriate for some time yet," the RBA said.
The RBA did upgrade the outlook for the near term, forecasting growth of 3.0% year-on-year growth in June, compared with 2.75% in the February statement. But in the case of inflation, the RBA lowered its near-term projection to a 2.75% gain year-on-year for underlying inflation from 3.00% in the February statement.
"These minor revisions reflect the net effect of the rise in the exchange rate over recent months - which is expected, at the margin, to restrain exports and boost imports over the next two years - and a slightly stronger outlook for consumption and dwelling investment over the coming year," the RBA said.
The RBA said the key uncertainty is related to the decline in mining investment and the anticipated pick-up in non-mining investment. The other uncertainty here is whether the timing of stronger activity in some parts of the economy coincides with weaker activity in other parts, the RBA said.
"The composition of activity could have implications for employment, government revenue and expenditure, and for capital flows and so the exchange rate," the RBA said.