With Australia’s economic indicators all pointing to healthy growth of both prices and real-estate values, the Reserve Bank may have no choice but to increase the cash rate by another 25 basis points when it meets tomorrow.
Producer and consumer prices, which indicate inflation, both came in above market expectations in the first quarter of the year. Core prices increased by 3.1% in annual terms – placing them outside the RBA’s 2-3% range.
While recent comments provided by the RBA suggest a gradual monetary adjustment process going forward, we think the risk to inflation is too great and that the RBA will need to raise the cash rate for a third-consecutive month,” ANZ research analyst Andrew Dowman said.
Consequently the market is expecting another rise tommorow of 25 points.