Despite the Reserve Bank leaving interest rates on hold for April, economists are tipping inflation will force another rate rise in May.
The RBA board voted to keep official interest rates steady at 7.25 per cent yesterday. This follows two rate rises in February and March, taking the cash rate to its highest level since July 1996. Commonwealth Bank of Australia chief economist Michael Blythe said the RBA was likely to raise interest rates again in May, before leaving them on hold until at least 2009, as it battled against inflation. "The domestic economy is still pretty strong and ... the risk is they (the RBA) consider inflation to be uncomfortably high," Mr Blythe said. "That may be enough to get another one (rate rise) over the line."
The March quarter consumer price index (CPI) data, due out on April 23, is expected to show annual inflation growth at 4 per cent, above the RBA target of 2-3 per cent. Rising food and petrol prices are contributing to higher inflation, with some economists arguing it will be at least a year before there’s evidence of inflation returning to the 2-3 per cent target.
Join the discussion on Commonwealth Bank (CBA)
|