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RBA monetary policy cuts inflation forecast, GDP outlook little changed

FXstreet.com (Barcelona) - The RBA, in its statement on monetary policy, has cut the 2013 inflation forecast while the GDP outlook remains almost unchanged. On the mining investment, the RBA commented that it is likely to stay at current levels through 2013/2014, a slightly positive sign that should help cool some dovish observers.

On growth: "The outlook for economic growth overall is little changed from that published in the February Statement. GDP growth is expected to be a little below trend over 2013, before picking up through 2014 to be around trend pace. The approaching peak in resource investment, the high level of the Australian dollar and ongoing fiscal consolidation are all likely to weigh on growth over the next year or so, while at the same time the low level of interest rates is helping to support demand."

On employment, the RBA stated: "With growth of economic activity forecast to be a little below trend, employment growth is expected to be moderate in the near term. Accordingly, the unemployment rate is expected to continue to edge higher for the next year or so, before a return to trend output growth gradually supports some improvement in labour market conditions."

Inflation-related comments followed: "In the near term, the forecasts for year-ended inflation are a little lower than those published in the February Statement, at close to 2 per cent through this year. To a large extent this reflects the fact that inflation in the March quarter was a bit lower than had been expected. Non-tradables inflation is expected to ease somewhat, given the improvement in productivity growth and recent moderate wage outcomes. But as deflation in tradables items is expected to pass, overall inflation is forecast to return to the middle of the inflation target by mid next year."

The RBA also said that with inflation a little lower than had been expected, and growth of economic activity likely to remain
below trend into next year, "the Board judged that a further reduction in the cash rate would help to support sustainable growth in the economy, and would be consistent with achieving the inflation target. The Board will adjust the cash rate as
appropriate to foster sustainable growth and low inflation."

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