Weekend Economist: Central bank cynicism

The Reserve Bank's downgraded growth outlook could see rates cut this year if household consumption remains downbeat. But more likely, the bank is being overly pessimistic on consumers and rates will hold steady until August 2015.

We were surprised to see that the Reserve Bank lowered its growth forecast for both 2014 and 2015 from 2.75 per cent and 3.25 per cent respectively to 2.5 per cent and 3 per cent. The bank qualifies that downgrade by noting that "the differences are well within usual ranges of uncertainty for the forecasts".

A closer look at the indicated profile suggests the following:


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