The Reserve Bank of Australia board landed on an interest rate pause when it met a fortnight ago. But there could be another increase on the horizon.
RBA also pointed to stickier-than-expected inflation in other countries.The resilience of Australian households, higher-than-expected population growth and wage boosts for parts of the public sector fed into the case for another interest rate hike in April.
Modelling by RBA staff last month found that with a bit more tightening, inflation is expected to return to the two to three per cent target by mid-2025. The rebound in population growth after migration ground to a halt during COVID could also be inflationary, they said, including by putting pressure on the housing stock.
In the private sector, the bank's business liaison program suggested annual wage growth would level out at a little below four per cent. The board also decided it was worth waiting for key data sources that would paint a clearer picture of the health of the economy, including the quarterly inflation and employment data, which has since come in hotter than expected.A full set of updated forecasts from the RBA staff is also expected at the May meeting.
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