Reserve Bank of Australia: Q2 CPI inflation expected at 4.2%, Q4 at 3.6%

Glonghui, February 3rd｜Reserve Bank of Australia: The CPI inflation is expected to be 4.2% in the second quarter, 3.6% in the fourth quarter, 2.7% in the fourth quarter of 2027, and 2.6% in the second quarter of 2028. The near-term GDP growth forecast has been revised upwards, while the 2027 growth forecast has been revised downwards. The GDP growth rate is expected to be 2.3% in the fourth quarter of 2025, 1.8% in the fourth quarter of 2026, and 1.6% in the fourth quarter of 2027. Although inflation has fallen sharply since its 2022 peak, it has rebounded significantly in the second half of 2025. The committee believes that inflation is likely to remain above the target level for some time, and raising the cash rate target is appropriate. Today's policy decision was passed unanimously. Labor market conditions are slightly tight. There is uncertainty regarding domestic economic activity, inflation outlook, and the degree of monetary policy tightening. Some indicators suggest that financial conditions may now be "slightly loose." The forecast is based on the assumption that the cash rate will be 3.9% in June and 4.2% in December. Private demand growth in the second half of 2025 far exceeds expectations. Inflation in the fourth quarter was "significantly higher" than expected, partly due to the weaker persistence of certain factors. The unemployment rate is expected to be 4.3% in the fourth quarter of 2026, 4.5% in the fourth quarter of 2027, and 4.6% in the second quarter of 2028. Total credit growth has rebounded significantly, and the cash rate is below some neutral indicators. The seasonally adjusted average inflation rate is expected to be 3.7% in the second quarter, 3.2% in the fourth quarter, 2.7% in the fourth quarter of 2027, and 2.6% in the second quarter of 2028. Close attention will be paid to data and the ongoing assessment of outlook and risks to guide its decisions. A large amount of data in recent months confirms that inflationary pressures will intensify significantly in the second half of 2025. Broad wage growth indicators remain strong. Capacity pressures are greater than previously assessed. Global economic uncertainty remains significant, but has not yet affected Australia so far.