Economic Buzz: RBA Lowers Inflation Outlook Amid Growth Worries

The Reserve Bank of Australia (RBA) has lowered its inflation outlook and reiterated its forecast for below trend growth this year, reflecting an elevated currency, a crest in resource investment and fiscal tightening. The outlook for non-mining business investment remains relatively weak over the next few months, the RBA said in its quarterly monetary policy statement today. 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. 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. Consumer prices will rise 2% in the year to December 2013, compared with as much as 3 per cent forecast three months earlier, the central bank said. The RBA predicted 2013 growth of about 2.5%. The bank cut the overnight cash-rate target to a record-low 2.75% this week as a benign inflation outlook gives him scope to boost industries including construction to rebalance growth away from resource investment. The RBA said there are signs the shift is occurring, while warning low rates threaten to ignite housing prices. Source by Commodity Insights