Even the PM is warning of low wage growth

From The New Daily.

Prime Minister Malcolm Turnbull has blamed low wage growth for the worst monthly drop in consumer spending since 2010.

Retail turnover in August declined for a second month in a row, according to official data released on Thursday, with the -0.6 per cent drop in trade the worst monthly performance in more than four years – putting economic growth at risk.

“While we’re seeing strong growth in employment, we’re yet to see stronger growth in wages so people feel as though they’re not getting ahead,” Mr Turnbull told Neil Mitchell on 3AW radio on Friday.

“That’s why economic growth is so important.”

The Prime Minister said wages would naturally rise as unemployment falls. “It’s supply and demand. Phil Lowe, the Governor of the Reserve Bank, was making this point just the other day,” he said.

Mr Turnbull also blamed higher energy bills, while some economists pointed the finger of blame at rising household debt and cooling house prices.

August retail trade slumped the most at ‘Newspaper and book retailing’, down -2.3 per cent; ‘Cafes, restaurants and catering services’, down -1.8 per cent; and at ‘Electrical and electronic goods retailing’, down -1.6 per cent.

Nowhere in Australia escaped, with retail sales falling in every state and territory, with New South Wales, Victoria and the ACT tied for worst performance at -0.8 per cent.

retail turnover
It was the worst month-on-month result, in seasonally adjusted terms, in four years. Source: ABS

The link between low wage growth, low spending and low economic growth has been a growing area of concern in recent months.

Commonwealth Bank CEO Ian Narev said in a speech on Friday that wage growth was the “No.1 metric” that policymakers should be concerned about.

The reason experts are so concerned is that any drop in consumer spending from cash-poor workers could have big consequences for economic growth, as household consumption currently accounts for roughly 57 per cent of Australia’s economic growth.

The full impact of the August slump will be seen when the September quarter GDP figures are released. In the GDP figures for the June quarter, the share of economic growth flowing to wage earners fell to 51.3 per cent in trend terms, the lowest since 1964, while the profit share soared to 27.3 per cent, the highest since 2012.

Dr Richard Holden, an economist at the University of New South Wales, has previously warned The New Daily that a drop in consumer spending “goes round in a vicious cycle”.

“If you have more of a drop on consumer spending, you’re going to see a contraction on the business side. It flows straight into business investment and business expansion, and that has a multiplier effect,” Dr Holden said at the time.

Commonwealth Bank economist Gareth Aird has described the August retail report as a “shocker”.

“It’s not surprising to see such weak retail trade outcomes given household income growth is so soft. But two consecutive monthly falls look at odds with the recent strength in the labour market.”

Mr Aird also said mortgage interest payments are taking up a larger proportion of household income, acting as “a handbrake on consumer spending and the retail sector in general”.

The expected arrival of online giant Amazon, and the growth of online retail in general, is also putting pressure on retailers, he said.

Australian Retailers Association executive director Russell Zimmerman blamed increased energy costs, higher tax burdens and an inflexible wage system for the concerning result and called for government action to lift confidence.

JP Morgan economist Ben Jarman said further weakness in household consumption would put at risk the Reserve Bank’s forecasts for a return to economic growth of 3 per cent, from the current annual rate of 1.8 per cent.

“The consumption data challenge the RBA’s assertion that growth will move back above potential,” he said.

Labor leader Bill Shorten told a media conference on Friday that the misuse of labour hire contracts were a major contributing factor to Australia’s low wage growth.

Mortgage holders struggling under rate hikes

From Australian Broker.

A significant percentage of mortgage holders are struggling to cover their monthly repayments while a large proportion has already been slugged with higher interest rates despite the official cash rate remaining steady at 1.5%.

These results come from new research commissioned by mortgage brokers iSelect through Galaxy Research which polled over 1,000 Australian households. The study found that 25% were experiencing difficulty covering their mortgage repayments. In the same vein, the research suggests that 33% have had their interest rates increased in the past year.

“A third of home owners have had their rate increase during the past 12 months and if the RBA was to increase the official cash rate, no doubt most lenders would quickly follow suit. This would mean more and more Aussie homes will have to find ways to cut back in order to afford their increased home loan repayments,” said Laura Crowden, spokesperson for iSelect Home Loans.

She expressed her concern that a quarter of households were already in financial difficulties given that the official rate has been forecast to rise in the coming year.

“Despite having access to low interest rates, record house prices have forced many families to significantly extend themselves with almost 40% of households making their payments without having a surplus left over,” she said.

“As such it is not surprising that many Aussie home owners are already struggling to make their monthly repayments even while interest rates are low.”

The research found if interest rates were to rise by 1%, more than 780,000 mortgage holders would struggle to make repayments. This includes 632,000 households which would have to cut back costs to cover repayments and 150,000 which would be forced into further debt.

“We know from speaking to our customers that many Aussies are really feeling the pinch of rising cost of living pressures on their stretched household budget, especially as energy bills continue to skyrocket across much of the country,” Crowden said.

The research also found that a large percentage of mortgage holders were paying too much despite the low cash rate. In fact, 54% were paying an interest rate of 4% or more while 13% were paying over 5%.

Retail Turnover On The Slide

More evidence of strained household budgets with the release today of the August 2017 ABS data on Retail Turnover.

Australian retail turnover fell 0.6 per cent in August 2017, seasonally adjusted, according to the latest Australian Bureau of Statistics (ABS) Retail Trade figures. This follows a fall of 0.2 per cent in July 2017.

In seasonally adjusted terms, there were falls in food retailing (-0.6 per cent), cafes, restaurants and takeaway food services (-1.3 per cent), household goods retailing (-1.0 per cent) and clothing, footwear and personal accessory retailing (-0.2 per cent). There were rises in department stores (0.7 per cent) and other retailing (0.1 per cent) in August 2017.

In seasonally adjusted terms, there were falls in all states and territories. “Victoria (-0.8 per cent) and Queensland (-0.8 per cent) led the falls,” said Ben James, Director of Quarterly Economy Wide surveys.

“There were also falls in New South Wales (-0.2 per cent), Western Australia (-0.6 per cent), South Australia (-0.6 per cent), the Australian Capital Territory (-0.8 per cent), Tasmania (-0.7 per cent) and the Northern Territory (-0.7 per cent).”

The trend estimate which irons out the bumps was a little more sanguine, with retail turnover rising 0.1 per cent in August 2017 following a 0.1 per cent rise in July 2017. Compared to August 2016, the trend estimate rose 2.8 per cent.

Some significant state variations, but overall direction is clearly down.

Online retail turnover contributed 4.6 per cent to total retail turnover in original terms.

More evidence of stressed household budgets, which is no surprise given the current economic settings.

The black swan turns pale

From Capital and Conflict.

For a few months we’ve been following the story of Australia’s housing bubble with new interest. It’s the potential crisis on no European’s screen. Which is concerning given the level of funding which Europe supplies to some of the world’s largest banks Down Under.

The issue in Australia is surprisingly similar to the sub-prime story in the US. And everyone agrees it’s all about land prices at the core.

Which is odd given the amount of land Australia has. But even that is up for debate if you read the papers.

Let’s turn to a more interesting angle in this Capital & Conflict.

How big is the Australian housing bubble? Capital Economics calculated that, based on a median house price to income ratio, Australian houses are about 38% overvalued. Which happens to be far worse than the US’s 30% in 2006.

ABC News reassured its readers that this time is different and Australia is special:

However, he noted that this measure does not take into account the long-term lower level of interest rates and therefore the bigger amount people can comfortably borrow and the lower rental returns investors demand.

This is morbidly hilarious. Rising interest rates happen, which increases the risk, not decreases it. Something that will only temporarily be affordable is not affordable and won’t benefit the buyer in the end.

Not only that, but rising rates are precisely what popped the sub-prime bubble, so it should be obvious that low rates are dangerous.

The latest development is a remarkable survey from Finder.com.au on just this issue. Australian Broker reports:

A staggering 57% of mortgage holders could not handle a $100 increase in their [monthly] loan repayments, according to new research by Finder.com.au.

This additional $100 is equivalent to an interest rate rise of just 0.45% based on the national average mortgage of $360,600. This means the average standard variable rate of 4.83% would only have to rise to 5.28% to put more than half of mortgage holders in stress.

Not only are Australians walking a tightrope on their repayments, but 39% of mortgages are interest only. A hit to house prices could spell disaster.

Surprisingly, it’s the wealthy that are in trouble. Martin North of Digital Finance Analytics tracks mortgage stress by suburb. And it’s the famously wealthy ones that are showing signs of distress.

Never forget how small a problem the US’s sub-prime bubble looked in 2007. Australia’s house price bubble is brewing trouble for you.

Rising Household Debt: What It Means for Growth and Stability

From The IMFBlog.

Whilst increased household debt gives an economy a boost in the short term, the IMF has found it creates greater risk 3-5 years later, lifting the potential for a financial crisis, as household struggle to repay.  Given the ultra-high debt levels in Australia, this is an important observation.

Debt greases the wheels of the economy. It allows individuals to make big investments today–like buying a house or going to college – by pledging some of their future earnings.

That’s all fine in theory. But as the global financial crisis showed, rapid growth in household debt – especially mortgages – can be dangerous.

A new IMF study takes a close look at the likely consequences of growth in household debt for different types of economies, as well as steps that policy makers can take to mitigate these consequences and to keep debt within reasonable limits. The overall message: there is a tradeoff between the short-term benefits and the medium-term costs of rising debt, but there is plenty that policymakers can do to ease this tradeoff, according to Chapter Two of the IMF’s October 2017 Global Financial Stability Report.

Given the widespread misery the crisis caused, you might think people have become skittish about borrowing more. Surprisingly, that’s not the case. Since 2008, household debt as a proportion of gross domestic product has grown significantly in a sample of 80 countries. Among advanced economies, the median debt ratio rose to 63 percent last year from 52 percent in 2008. Among emerging economies, it increased to 21 percent from 15 percent.

Reversal of fortune

In the short term, an increase in the ratio of household debt is likely to boost economic growth and employment, our study finds. But in three to five years, those effects are reversed; growth is slower than it would have been otherwise, and the odds of a financial crisis increase. These effects are stronger at the higher levels of debt typical of advanced economies, and weaker at lower levels prevailing in emerging markets.

What’s the reason for the tradeoff? At first, households take on more debt to buy things like new homes and cars. That gives the economy a short-term boost as automakers and home builders hire more workers. But later, highly indebted households may need to cut back on spending to repay their loans. That’s a drag on growth. And as the 2008 crisis demonstrated, a sudden economic shock – such as a decline in home prices–can trigger a spiral of credit defaults that shakes the foundations of the financial system.

More specifically, our study found that a 5 percentage-point increase in the ratio of household debt to GDP over a three-year period forecasts a 1.25 percentage-point decline in inflation-adjusted growth three years in the future. Higher debt is associated with significantly higher unemployment up to four years ahead. And a 1 percentage point increase in debt raises the odds of a future banking crisis by about 1 percentage point. That’s a significant increase, when you consider that the probability of a crisis is 3.5 percent, even without any increase in debt.

The good news is that policy makers have ways to reduce risks. Countries with less external debt and floating exchange rates, and which are financially more developed, are better placed to weather the consequences.

Mitigating risks

Better financial-sector regulations and lower income inequality also help. But this is not the end of the story. Countries can also mitigate the risks by taking measures that moderate the growth of household debt, such as modifying the down payment required to purchase a house or the fraction of a household income that can be devoted to debt repayments. So, good policies, institutions, and regulations make a difference – even in countries with high ratios of household debt to GDP. And countries with poor policies are more vulnerable – even if their initial levels of household debt are low.

Australian household electricity prices may be 25% higher than official reports

From The Conversation.

The International Energy Agency (IEA) may be underestimating Australian household energy bills by 25% because of a lack of accurate data from the federal government.

The Paris-based IEA produces official quarterly energy statistics for the 30 member nations of the Organisation for Economic Cooperation and Development (OECD), on which policymakers and researchers rely heavily. But to provide this service, the IEA relies on member countries to provide it with good-quality data.

Last month, the agency published its annual summary report, Key World Statistics, which reported that Australian households have the 11th most expensive electricity prices in the OECD.

But other studies – notably the Thwaites report into Victorian energy prices – have reported that households are typically paying significantly more than the official estimates. In fact, if South Australia were a country it would have the highest energy prices in the OECD, and typical households in New South Wales, Queensland or Victoria would be in the top five.

A spokesperson for the federal Department of Environment and Energy, the agency responsible for providing electricity price data to the IEA, told The Conversation:

Household electricity prices data for Australia are sourced from the Australian Energy Market Commission annual Residential electricity price trends report. The national average price is used, with GST added. It is a weighted average based on the number of household connections in each jurisdiction.

The Australian energy statistics are the basis for the Australia data reported by the IEA in their Key world energy statistics. The Department of the Environment and Energy submits the data to the IEA each September. Some adjustments are made to the AES data to conform with IEA reporting requirements.

But it is clear that the electricity price data for Australia published by the IEA is at least occasionally of poor quality.

The Australian household electricity series in the IEA’s authoritative Energy Prices and Taxes quarterly statistical report stopped in 2004, and only resumed again again in 2012.

Between 2012 and 2016, the IEA’s reported residential price series data for Australia showed no change in prices.

Yet the Australian Bureau of Statistics’ electricity price index, which is based on customer surveys, showed a roughly 20% increase in the All Australia electricity price index over this period.

Australia is also the only OECD nation not to report electricity prices paid by industry.

Current prices

This year’s reported household average electricity prices are almost certainly wrong too. The IEA reports that household electricity prices in Australia for the first quarter of 2017 were US20.2c per kWh.

At a market exchange rate of US79c to the Australian dollar, this puts Australian household electricity prices at AU28c per kWh. Adjusted for the purchasing power of each currency, the comparable price is AU29c per kWh.

By contrast, the independent review of the Victorian energy sector chaired by John Thwaites surveyed the real energy prices paid by customers, as evidenced by their bills. In a sample of 686 Victorian households, those with energy consumption close to the median value were paying an average of AU35c per kWh in the first quarter of 2017. This is 25% more than the IEA’s official estimate. At least part of this difference is explained by the AEMC’s assumption that all customers in a competitive retail market are supplied on their retailers’ cheapest offers. But this is not the case in reality.

Surveying real electricity and gas bills drastically reduces the range of assumptions that need to be made to estimate the price paid by a representative customer. Indeed, as long as the sample of bills is representative of the population, a survey based on actual bills produces a reliable estimate of representative prices in retail markets characterised by high levels of price dispersion, as Australia’s retail electricity markets are.

Pointing to a reliable estimate of Victoria’s representative residential price is, of course, not enough to prove that the IEA’s estimate is wrong. It could just as easily mean that Victorians are paying way more than the national average for their electricity.

But the idea that Victorians are paying more than average does not stack up when we look at the state-by-state data, which suggests that Victoria is actually somewhere in the middle. Judging by the prices charged by the three largest retailers in each state and territory, Victorian householders are paying about the same as those in New South Wales and Queensland, less than those in South Australia, and more than those in Tasmania, the Northern Territory, Western Australia and the Australian Capital Territory.

Residential electricity prices. Author provided

The IEA can not reasonably be blamed for the inadequate residential data for Australia that they report, and the nonexistent data on electricity prices paid by Australia’s industrial customers. The IEA does not do its own calculation of prices in each country, but rather it relies on price estimates from official sources in those countries.

An obvious question that arises from this is where Australia really ranks internationally if we used prices that reflect what households are actually paying.

This is contentious, not least because prices in New South Wales, Queensland and South Australia increased – typically around 15% or more – from July this year. We do not know how prices have changed in other OECD member countries since the IEA’s recent publication (which covered prices for the first quarter of 2017). But we do know that prices in Australia have been far more volatile than in any other OECD country.

Assuming that other countries’ prices are roughly the same as they were in the first quarter of 2017, our estimate using the IEA’s data is that the typical household in South Australia is paying more than the typical household in any other OECD country. The typical household in New South Wales, Queensland or Victoria is paying a price that ranks in the top five.

It should also be remembered that these prices are after excise and sale tax. Taxes on electricity supply in Australia are low by OECD standards – so if we use pre-tax prices, Australian households move even higher up the list.

There are serious question marks over Australia’s official electricity price reporting. Policy makers, consumers and the public have a right to expect better.

Author: Bruce Mountain, Director, Carbon and Energy Markets., Victoria University 

Trend dwelling approvals rise 1.1 per cent in August

The number of dwellings approved rose 1.1 per cent in August 2017, in trend terms, and has risen for seven months, according to data released by the Australian Bureau of Statistics (ABS) today.

In trend terms, approvals for private sector houses rose 0.9 per cent in August. Private sector house approvals rose in Queensland (2.0 per cent), South Australia (1.4 per cent), Victoria (1.1 per cent) and Western Australia (0.3 per cent), but fell in New South Wales (0.3 per cent).


Dwelling approvals increased in August in the Australian Capital Territory (8.9 per cent), Northern Territory (8.3 per cent), Victoria (1.5 per cent), Tasmania (1.2 per cent), Queensland (1.0 per cent), South Australia (0.9 per cent) and New South Wales (0.7 per cent), but decreased in Western Australia (0.8 per cent) in trend terms.

“Dwelling approvals have shown signs of strength in recent months, although are still below the record high in 2016,” said Bill Becker, Assistant Director of Construction Statistics at the ABS. “The August 2017 data showed that the number of dwellings approved is now 6.5 per cent lower than in the same month last year, in trend terms.”

In seasonally adjusted terms, dwelling approvals increased by 0.4 per cent in August, driven by a rise in private dwellings excluding houses (4.8 per cent), while private house approvals fell 0.6 per cent.

The value of total building approved fell 0.3 per cent in August, in trend terms, after rising for six months. The value of residential building rose 0.7 per cent while non-residential building fell 1.8 per cent.

Bank Mortgage Lending Falls

The latest data from APRA, the monthly banking stats to August 2017 shows the first overall fall in the value of mortgage loans held by the banks, for some time, so the macroprudential intervention can be said to be working – finally – perhaps! Or it could be more about the continued loan reclassification?

Overall the value of mortgage portfolio fell 0.11% to $1.57 trillion. Within that owner occupied lending rose 0.1% to $1.02 trillion while investment lending fell 0.54% to $550 billion. As a result, the proportion of loans for investment purposes fell to 34.93%.

This explains all the discounts and special offers we have been tracking in the past few weeks, as banks become more desperate to grow their books in a falling market.

Here are the monthly growth trends.

Portfolio movements across the banks were quite marked. There may be further switches, but we wont know until the RBA data comes out, and then only at an aggregate level. We suspect CBA did some switching…

The loan shares still show Westpac the largest lender on investor mortgages and CBA leading the pack on owner occupied loans.

All the majors are below the 10% investor loan speed limit.

So the question will be, have the non-bank sector picked up the slack? In fact the RBA says $1.7 billion of loans were switched in the month. This probably explains only some of the net fall.


The Disconnect Between Unemployment and Wages

There is an assumption that as employment rates and growth picks up,  the much needed wage growth will follow. We discussed this on ABC’s The Business last week, with HSBC’s Chief Economist who held the view that the RBA won’t lift the cash rate here until wages growth comes through. We were not so sure.

But an interesting piece from the The IMFBlog suggests there are more fundamental forces at work, especially in terms of employment patterns and the rise of part-time work, which suggests that unemployment and wage growth is more disconnected now. We think underemployment is one of the most critical drives of wage stagnation. If this is true, then wages may be lower for longer, which is not good news for those households with heavy debt burdens, especially if rates rise. We release our September analysis of mortgage stress next week. Here is the IMF commentary:

Over the past three years, labor markets in many advanced economies have shown increasing signs of healing from the Great Recession of 2008-09. Yet, despite falling unemployment rates, wage growth has been subdued–raising a vexing question: Why isn’t a higher demand for workers driving up pay?

Our research in the October 2017 World Economic Outlook sheds light on the sources of subdued nominal wage growth in advanced economies since the Great Recession.  Understanding the drivers of the disconnect between unemployment and wages is important not only for macroeconomic policy, but also for prospects of reducing income inequality and enhancing workers’ security.

Job growth picked up, wage growth less so

In many cases, employment growth has picked up and headline unemployment rates are now back to their pre-Great Recession ranges. Still, nominal wage growth remains well below where it was prior to the recession. Sluggish wages may reflect deliberate efforts to slow down wage growth from unsustainably high levels, as was the case with some countries in Europe. But the pattern is more widespread.

There are several factors at play in explaining this pattern, both cyclical and structural – or slow-moving – in nature.

A key cyclical factor is labor market slack – that is, the excess supply of labor beyond the amount that firms would like to employ.

First off, however, it is important to recognize that headline unemployment rates may not be as indicative of labor market slack as they used to be. Hours per worker have continued to decline (extending a trend that began before the Great Recession).

Several countries have also experienced higher rates of involuntary part-time employment (workers employed for less than 30 hours per week who report they would like to work longer) and an increased share of temporary employment contracts These developments in part reflect continued weak demand for labor (itself a reflection of weak final demand for goods and services).

Another key driver of wage growth is the widely-recognized slowdown in trend productivity growth. Sustained weakness in output per hour worked can squeeze business profitability and eventually weigh on wage growth as firms becomes less willing to accommodate fast increases in compensation.

Slower-moving factors

Besides these forces, slower-moving factors such as ongoing automation (proxied by the falling relative price of investment goods) and diminished medium-term growth expectations also appear to hold back wage growth. However, our analysis suggests that automation may not have made a large contribution to subdued wage dynamics following the Great Recession.

The analysis also indicates sizable common global factors behind wage weakness in the aftermath of the Great Recession and especially during 2014–16. In other words, labor market conditions in other countries appear to have a growing effect on wage setting in any given economy. This points to the possible roles of the threat of plant relocation across borders, or an increase in the effective worldwide supply of labor in a context of closer international economic integration.

Putting it all together

The relative roles of labor market slack and productivity growth vary across countries. In economies where unemployment rates are still appreciably above their averages before the Great Recession (such as Italy, Portugal, and Spain), high unemployment can explain about half of the slowdown in nominal wage growth since 2007, with involuntary part-time employment acting as a further drag on wages. Wage growth is therefore unlikely to pick up until slack diminishes meaningfully—an outcome that requires continued accommodative policies to boost aggregate demand.

In economies where unemployment rates are below their averages before the Great Recession (such as Germany, Japan, the United States, and the United Kingdom), slow productivity growth can account for about two-thirds of the slowdown in nominal wage growth since 2007. Even here, however, involuntary part-time employment appears to be weighing on wage growth, suggesting greater slack in the labor market than headline unemployment rates capture. Assessing the true degree of slack in these economies will be important when determining the appropriate pace of exit from accommodative monetary policies.

Broader changes in the labor market

Our research further indicates that sluggish wage growth has occurred in a context of broader changes in the labor market. The increase in involuntary part-time employment itself, for example, is in part explained by cyclically-weak demand.  Accommodative policies that help lift aggregate demand would therefore lower involuntary part-time employment. But it is also associated with slower-moving factors such as automation, diminished medium-term growth expectations, and the growing importance of the service sector.

Some of these developments represent persistent changes in relationships between firms and workers that mirror underlying shifts in the economy – with the emergence of the gig economy and shrinkage of traditional sectors such as manufacturing. Policymakers may therefore need to enhance efforts to address the vulnerabilities that part-time workers face. Examples of possible measures include broadening minimum wage coverage where it does not currently include part-time workers; securing parity with full-time workers by extending pro-rated annual, family, and sick leave; and strengthening secondary and tertiary education to upgrade skills over the longer term.

NZ Holds Official Cash Rate 1.75 percent

The New Zealand Reserve Bank today left the Official Cash Rate (OCR) unchanged at 1.75 percent.

Global economic growth has continued to improve in recent quarters. However, inflation and wage outcomes remain subdued across the advanced economies and challenges remain with on-going surplus capacity. Bond yields are low, credit spreads have narrowed and equity prices are near record levels.  Monetary policy is expected to remain stimulatory in the advanced economies, but less so going forward.

The trade-weighted exchange rate has eased slightly since the August Statement.  A lower New Zealand dollar would help to increase tradables inflation and deliver more balanced growth.

GDP in the June quarter grew in line with expectations, following relative weakness in the previous two quarters.  While exports recovered, construction was weaker than expected.  Growth is projected to maintain its current pace going forward, supported by accommodative monetary policy, population growth, elevated terms of trade, and fiscal stimulus.

House price inflation continues to moderate due to loan-to-value ratio restrictions, affordability constraints, and a tightening in credit conditions. This moderation is expected to continue, although there remains a risk of resurgence in prices given population growth and resource constraints in the construction sector.

Annual CPI inflation eased in the June quarter, but remains within the target range. Headline inflation is likely to decline in coming quarters, reflecting volatility in tradables inflation.  Non-tradables inflation remains moderate but is expected to increase gradually as capacity pressure increases, bringing headline inflation to the midpoint of the target range over the medium term.  Longer-term inflation expectations remain well anchored at around two percent.

Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly.