The Quarterly Monetary Policy Statement from the Reserve Bank of Australia revealed that policymakers upgraded their economic growth and inflation forecasts: Glenn Stevens and company now see GDP expanding 1.75% in 2009 and 3.25% in 2010 versus the previously expected 0.5% and 2.25%, respectively. The bank kept its 2009 core inflation forecast at 3.25% but lifted its 2010 prediction to 2.25% from 2%, with next year’s slowdown linked to a stronger Australian Dollar and lackluster wage growth. The RBA expects employment to remain sluggish until the mid-2010 but maintained that business investment and export growth will be strong, adding that further gradual rate increases are likely over time. Still, traders have sharply reduced their bets on aggressive tightening from the Australian monetary authority, with a Credit Suisse gauge of priced-in 1-year rate hike expectations dropping 27 basis points after the RBA hinted a shift to a neutral policy stance earlier this week, the largest one-day decline in a year.
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