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MNI BRIEF: RBA Ups Inflation Forecast, Warns More Hikes Needed

(MNI) Perth

The Reserve Bank of Australia repeated its warning of more interest rate rises after lifting its inflation forecasts for 2023 amid elevated price pressures, while also raising its growth forecast for the first half of 2023, according to the Statement on Monetary Policy released Friday.

The bank lifted its forecast for the Consumer Price Index to 6.75% for June, up from 6.25%, and inflation is expected to ease to 4.75% by December. CPI is forecast to return to 3% by mid-2025. The trimmed mean was raised to 6.25% for June, up from 5.5%, and lifted to 4.25% for December compared to 3.75%.

"Inflation could turn out to be higher than expected if the high inflation environment leads to greater feedback between wages and prices than has been typical in the inflation targeting era. On the other hand, inflation could be lower than expected if the easing in goods inflation is faster or more widespread than anticipated," the RBA said.

The economy is expected to grow at a 2.25% y/y pace by June, up from 2% y/y in the November SMP. Forecasts for 2024 were maintained. The RBA's first growth forecast for 2025 sees growth rebounding slightly to 1.75% y/y in June.

Robert covers RBA and RBNZ policy and the economy for MNI in Australia.
Robert covers RBA and RBNZ policy and the economy for MNI in Australia.

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