some weeks before the nber ’ s pronouncement. but a business cycle contraction was definitely under way prior to september 11. the nber ’ s statement was only 12 weeks ago. between late november and today, many observers have begun talking about a us recovery. financial market prices reflected this change relatively early on, as they tend to do. share markets rallied strongly through the last weeks of 2001 and into the early part of this year, though the shine has come off a little since then. bond markets pushed up long - term interest rates somewhat, and credit spreads for corporate bonds have tended to decline. forecasts of economic growth in the united states appear to have stopped falling, and the latest actual figure for gdp, while weak in an absolute sense, was stronger than most had expected, and much stronger than many feared in the early days after september 11. to no small extent, this reflects the fact that the underlying us economy weathered the impact of the terrorist attacks themselves very well. post - attack, the financial system was up and running again very quickly, especially given the destruction of physical infrastructure at the heart of the system. and while american corporations have cut their investment spending very sharply indeed, households have continued to increase their spending on consumer goods and services. macroeconomic policy has been supportive, with a tax cut affecting household incomes during the second half of 2001 – right when it was most needed – and a very rapid easing of monetary policy beginning in early january 2001, and continuing with force right through the year. in fact, if one were to adopt the view that a recession began last march and, noting that recessions typically ( if there is a typical recession ) last about a year, to set about looking for signs that an upturn might be near, one would find some evidence in the real economy to support that view. inventory adjustment, part of the classical business cycle story – and very much a part of this recession in the " new economy ", especially in the production of it goods themselves – began quite early, and is by now well advanced. the adjustment to investment spending has been quick. signs of a bottoming in parts of the tech sector have begun to emerge. the adjustment to business payrolls may also have gone a long way towards completion, judging by recent labour market data. so an analysis of the normal business - cycle dynamics does increasingly suggest that the us economy could well begin a new expansion soon. if it does, the us recession would have been no deeper

been in decades. and various government initiatives to ease cost - of - living pressures are contributing to lower increases in many administered prices. together, these factors have led to a low rate of inflation for non - traded goods and services ( graph 11 ). https : / / www. rba. gov. au / speeches / 2019 / sp - gov - 2019 - 05 - 21. html 11 / 16 5 / 21 / 2019 the economic outlook and monetary policy | speeches | rba graph 10 https : / / www. rba. gov. au / speeches / 2019 / sp - gov - 2019 - 05 - 21. html 12 / 16 5 / 21 / 2019 the economic outlook and monetary policy | speeches | rba graph 11 the picture for traded goods and services inflation is a little different. recently, there have been increases in some food prices as a result of the drought and floods. the earlier small depreciation of the exchange rate has also been passed through into the prices for some consumer durables. these developments mean that tradables prices as a group are no longer declining. even so, inflation remains low for most traded goods and services. looking forward, the central forecast is for underlying inflation of around 1¾ per cent this year, 2 per cent next year and a little higher the following year. in headline terms, inflation is expected to be noticeably higher in the june quarter, due to the recent increase in petrol prices. for 2019 as a whole, headline cpi inflation is expected to be around 2 per cent and the same the following year. this means that inflation is expected to remain around the bottom of the medium - term target range over the forecast period. monetary policy i would like to turn now to monetary policy and how our thinking and communication have evolved over recent times. you might recall that through 2018 we had three main messages : ( 1 ) we were making progress towards our inflation and unemployment goals ; ( 2 ) given that this progress was expected to continue, it was more likely that the next move in interest rates would be up, rather than down ; and https : / / www. rba. gov. au / speeches / 2019 / sp - gov - 2019 - 05 - 21. html 13 / 16 5 / 21 / 2019 the economic outlook and monetary policy | speeches | rba ( 3 ) given the progress towards our goals was expected to be only gradual, any move in interest rates was some time off. earlier this year, our assessment of the balance