The Reserve Bank on Tuesdaykept interest rates on hold at 4.35 per cent and released its latestquarterly outlook for the economy.
In a collective statement after the board’s first-ever two-day meeting,it warned it is prepared to keep raising interest rates to combat high inflation.
But in its statement on monetary policy accompanying the rates decision,the bank also released forecasts for the economy that assume rates will be lower by the year’s end.
Here are five key takeaways about its outlook for the economy:
1. The bank is still worried about inflation pressures across the economy,arguing consumers – even though many are struggling – are continuing to spend up big,particularly in areas stretching from eating out to insurance.
“Our overall assessment is that aggregate demand remains above the economy’s capacity to supply goods and services,thereby putting pressure on inflation,” the statement on monetary policy says.
2. The economy is going to slow rather abruptly over the next few months as the combination of high interest rates,the cost-of-living and high personal taxes bite.
“Many households have had to make difficult adjustments in response to the challenging conditions,particularly households with lower financial buffers,” it says.