Economic growth is expected to hold in a 2.75-3.25 per cent band over 2017. The Reserve Bank expects inflation to gradually lift back towards the 2-3 per cent target band.
Firm domestic economic growth and an improvement in global economic growth should lead to a modest uptrend in inflation. But at the other end of the equation, technology and globalisation will continue to cap inflationary pressures.
At present we think the Reserve Bank will stay on the interest rate sidelines for much of 2017. The Reserve Bank still has the ability to cut rates if underlying inflation stubbornly remains below the low end of the 2-3 per cent target band.