RBA hoping to hit its inflation target sooner

The Reserve Bank of Australia’s new forecasts infer that it doesn’t think a dollar of US$0.80 will knock the economy off course. In fact, its new forecast that underlying inflation will rise to the 2-3% target a bit sooner implies that interest rates may need to rise earlier. That said, we doubt GDP growth or inflation will live up to the Bank’s expectations. If so, rates may stay at 1.5% for another two years yet.