MNI BRIEF: RBA Sticks to "Reasonable Timeframe" with 25bp Hike

The Reserve Bank of Australia lifted the cash rate 25bp to 4.1% today, its 12th hike since May 2022 and its highest level since April 2012, while the Board stuck to last month's message of returning inflation to its 2-3% target within a “reasonable timeframe.”

In a statement, the Board noted recent data points indicated the upside risks to the inflation outlook have increased and it had responded to this. “While goods price inflation is slowing, services price inflation is still very high and is proving to be very persistent overseas," the Board said. Wages growth has picked up in response to the tight labour market and high inflation, the Board noted. "Growth in public sector wages is expected to pick up further and the annual increase in award wages was higher than it was last year."

MNI reported last week the higher April CPI print at 6.8% from 6.3% reported in March and the Fair Work Commission’s better-then-anticipated 5.75% lift to award wages would add pressure on the RBA to lift rates (see: MNI RBA WATCH: Anticipation Builds for Another RBA Rate Rise).

RBA Governor Philip Lowe will provide greater detail on the Board’s decision at the Morgan Stanley Australia Summit in Sydney on June 7.