Is the RBA’s optimism signal or spin?

There is definitely a role for the Reserve Bank of Australia to manage expectations by signalling where it thinks the economy is heading. But by sounding more optimistic than its own forecasts, there’s a danger that the RBA has moved from signal to spin. This makes its job of boosting economic growth and inflation harder and may reduce its ability to effectively manage expectations in the future. However, it’s a bit worrying that more recently this signal has become somewhat detached from the RBA’s actual forecasts. For example, the policy statement released after February’s meeting said that the “Bank’s central scenario remains for economic growth to be around 3% over the next couple of years”, when the forecasts published in the SMP three days later showed very clearly that growth is expected to be below 2.0% in the first half of this year.  This is perhaps understandable since annual growth is going to be held back by the temporary drag from the fall in GDP in the third quarter of last year. And the RBA presumably just wanted to underline that it hasn’t changed its outlook beyond that.