AUD/USD – RBA throttles back on GDP forecast

on Aug 9, 2013

**, Friday 9 August:**

The Reserve Bank of Australia has cut its GDP growth outlook to 2.25 percent from 2.5 percent in the central bank’s latest Monetary Policy Statement, released today at 02.30 BST. The Australian economy has been slowing on account of a decelerating China and lower levels of mining investment. But while acknowledging that “there remains considerable uncertainty about how this transition will proceed”, the central bank has not seen fit to revise its 2014 GDP growth forecast of 2.5 to 3.5 percent.

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And there’s been no adjustment of the inflation forecast despite this year’s depreciation of the AUD. The RBA expects CPI to rise by 2.25 percent this year, which is in line with the inflation target of two to three percent which has allowed the cash rate to be cut to a record low 2.5 percent.
Notably, the Monetary Policy Statement did not provide any ‘forward guidance’ on the prospects of future rate cuts though the statement contained the assurance that the RBA will “adjust policy as needed to foster sustainable growth in demand”. The belief is expressed that further depreciation of the AUD could ‘’deliver above-trend growth sooner than currently forecast.”

Following release of the statement, the AUD retraced from the day’s low of 0.9087 and at the start of European trading is hovering around 0.9147, 0.48 percent up for the day. Earlier in the day the pair set new high for the week at 0.9154, 3.06 percent up from the three-year low at 0.8848 reached on Monday.
In the US, Wholesale Inventories for June m/m are due out at 15.00 BST, with analysts expecting growth of 0.2 percent versus May’s decline of 0.5 percent.


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