Australia's central bank on Friday said core inflation was likely to remain below target all the way to 2018, providing scope for the economy to run even faster, a dovish assessment that left the door wide open to yet more cuts in interest rates.
The Reserve Bank of Australia's (RBA) subdued outlook for inflation was all the more meaningful as it had only just cut rates to an all-time low of 1.5 percent, suggesting it doubted the easing would generate price pressures anytime soon.
"Inflation is likely to remain below 2 percent over most of the forecast period (to end 2018)," the central bank said in its 72-page quarterly outlook on the economy.
"While the prospects for growth in economic activity are positive, there is room for even stronger growth."
The RBA aims to keep inflation within a band of 2 to 3 percent over the long run, but the headline consumer price index rose just 1 percent in the year to June while underlying measures ran at a record low of 1.5 percent.
That prompted the RBA to cut its cash rate by a quarter point this week, its second easing this year as it seeks to defend the economy from creeping deflation that has become the bane of developed economies.
It offered no forward guidance on whether it would ease again but said the cash rate was assumed to move broadly in line with market pricing.