MNI BRIEF: RBA Keeps To 2024 Rate Rise On Inflation Outlook

The Reserve Bank of Australia has updated its economic outlook, with new forecasts showing the bank does not see inflation moving into its target range before late 2023, which would be consistent with a 2024 interest rate rise.

The forecasts are included in Friday's updated Statement on Monetary Policy, which forecast trimmed mean inflation – the RBA's preferred measure – at 2.5% by December 2023. This is at the halfway point in the RBA's target range of 2% to 3%.

Inflation would be driven by wages growth, currently at 1.7%, which is forecast at 3% by December 2023.

"Depending on the trajectory of the economy at that time, the Board judges that this outcome could be consistent with the first increase in the cash rate being in 2024," the statement said. Trimmed mean inflation data last week surprised by hitting 2.1%, but the RBA does not see it climbing beyond 2.25% until late 2023.

While this was the bank's baseline scenario, there were "some other plausible scenarios" where wages and inflation would grow faster and "an increase in the cash rate in 2023 could be warranted."

"However, in the Board's view, the latest data and forecasts do not warrant an increase in the cash rate in 2022," the statement said.

The RBA this week left rates unchanged at the record low of 0.10%, with Governor Philip Lowe taking issue with market views that the bank would have to raise rates in 2022, see: MNI STATE OF PLAY: Ambiguity On Inflation Clouds RBA Rate View.