Weekend Economist: Inflated expectations

The Reserve Bank's upwardly revised inflation forecasts would be disturbing if its assumptions weren't so vulnerable.

The Reserve Bank has raised its forecasts for growth and inflation in its February Statement on Monetary Policy. The key changes for GDP are: growth to December 2013 up from 2.25 per cent in November to 2.5 per cent in February; growth in 2014 up from 2-3 per cent in November to 2.25 per cent-3.25 per cent in February. For underlying inflation: to June 2014, up from 2.5 per cent in November to 3 per cent in February; to December 2014, up from 2-3 per cent in November to 2.25 per cent-3.25 per cent in February.

The revised growth forecasts are in line with our expectations.

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