The Latest: The RBA has decided to leave the cash rate on hold at 0.10% for April.

The Reserve Bank of Australia (RBA) is set to have its monthly board meeting at 2.30pm AEST to discuss whether it's time to increase the cash rate.

This comes off the back of last month's meeting, where RBA Governor Philip Lowe said that a cash rate hike this year is 'plausible'.

The RBA has maintained that the cash rate will not increase until inflation and wage growth are 'sustainably' within the 2 to 3% target range. 

Inflation data from the ABS revealed that underlying inflation hit 2.6% in December 2021 - which is the "midpoint of the target band" according to Dr Lowe.

Until then the RBA had repeatedly missed its inflation targets for around seven years.

Wage growth also fell into the RBA's target range, rising to 2.3% in December 2021 according to ABS data.

With the prospect of a cash rate hike this year now on the cards, what are the odds the RBA will pull the trigger today?

  Outcome RBA Forecast Difference
(percentage points)
GDP Growth 5* +1.5
Unemployment Rate 4.0 −1.5
CPI Inflation 3.5 +2
Underlying Inflation 2.6 +1.1
Wage Price Index 2.3 +0.55

(a) * Estimate based on available data.

Sources: ABS; RBA

The votes are in: No rate hike is expected today

Tapas Strickland, NAB's Director of Economics, said "no change is expected" to come from the RBA's meeting today, but that the key focus will be on the final policy paragraph.

"The prior March post-meeting Statement concluded 'The Board is prepared to be patient as it monitors how the various factors affecting inflation in Australia evolve'," Mr Strickland said.

"With core inflation expected to blast through the RBA’s February SoMP forecasts, the RBA will have reduced scope to be patient in balancing the risks of moving too early against moving too late."

Mr Strickland said unemployment is already at its lowest since 1974 and set to dip below 4% next month, and NAB forecasts trimmed mean inflation for the March quarter to hit 1.2%.

"If the RBA removes the word 'patient', markets will take that as a sign of a clear nod to the importance of the March quarter's Consumer Price Index (CPI) and lines up a May or June for the first rate hike," he said.

Shane Oliver, AMP Chief Economist, also believes the RBA will leave the cash rate untouched today.

"We expect the first rate hike in June and the cash rate to reach 0.75% by year end and 1.5% next year," Mr Oliver said.

"The extra stimulus in the Budget increases the chance that the first rate hike is 0.4% rather than 0.15% (taking the cash rate to 0.5%), with the cash rate reaching 1% by year-end."

Anneke Thompson, Chief Economist at CreditorWatch, said the cash rate should remain unchanged for at least one more month as the Federal Election looms.

"It does, however, seem that inflation is here to stay, at least for the short term, and therefore a rise in the cash rate is imminent," Ms Thompson said.

"Even higher wage growth is forecasted once bonuses, promotions and other measures of labour elasticity are factored in."

Image by Mohamed Hassan on Pixabay

Ready, Set, Buy!

Learn everything you need to know about buying property – from choosing the right property and home loan, to the purchasing process, tips to save money and more!

With bonus Q&A sheet and Crossword!

By subscribing you agree to our privacy policy