In a keynote address, RBA Governor Phillip Lowe said that with the Term Funding Facility (TFF) coming to an end, the RBA's main focus is now on the level of the cash rate.
The RBA has previously maintained that the cash rate will not rise until inflation and wage growth are 'sustainably' within the 2 to 3% target range, but softened its steadfastness on this not happening until 2024.
Though no real timeline has been given, citing the uncertain times which have made forecasting more difficult than usual, Dr Lowe said that it's 'plausible' that the cash rate will increase later this year.
"The recent lift in inflation has brought us closer to the point where inflation is sustainably in the target range," Dr Lowe said.
"So too have recent global developments. But we are not yet at that point.
"In underlying terms, inflation has just reached the midpoint of the target band for the first time in over seven years."
However, he points out that this comes at a time of 'very large' supply chain and distribution disruptions, as well as aggregate wage growth being no higher than it was before the pandemic.
"In these circumstances, we have scope to wait and assess incoming information and see how some of the uncertainties are resolved," Dr Lowe said.
"We can be patient in a way that countries with substantially higher rates of inflation cannot."
Dr Lowe points to US inflation, which increased by 7.5% over the year to January, as well as inflation in the UK, Germany, Canada and New Zealand being at its highest in decades.
Comparatively, headline inflation in Australia is 3.5% - less than half the rate of the US - while underlying inflation is running at 2.6%.
Rising inflation in Australia can be seen in the cost of goods going up, such as petrol prices nearing $2 a litre.
Dr Lowe said there are two issues that the RBA is paying close attention to: supply price shocks and the extent to which the Ukraine war will compound onto this, as well as how labour costs in Australia evolve.
"Prior to the war in Ukraine, there was some evidence that the supply-side issues in the global economy were gradually being resolved," he said.
"Delivery times had shortened a bit, global car production was increasing again and the prices of semiconductors had come off their peaks.
"These developments were providing a basis for expecting that supply-side inflation pressures would ease over time, both globally and here in Australia."
Are the big bank forecasts on the money?
Off the back of this address, Commonwealth Bank economists jumped to back their previous prediction that the cash rate will hike in June 2022.
"RBA Governor Philip Lowe today sounded closer to raising interest rates than at any other time over the pandemic," CBA economists said.
"The RBA Governor made it crystal clear that the RBA do not need to see two further CPI prints before raising the cash rate."
NAB economists also recently brought their forecasts forward by three months, now believing Australian will see the first cash rate hike in August 2022.
Chad Hoy Poy, National Lending Manager at digital lender WLTH, said NAB's latest prediction could mean that now is the time to get ready for a steady increase in mortgage rates.
"It is expected that home loan interest rates will increase mid to late 2022, the extent of the rise is difficult to forecast," Mr Hoy Poy said.
"It all depends if lenders pass on the full rate rise to their customers or absorb more of the costs themselves to remain competitive in the market.
"I believe there will be a few lenders keeping their variable rates relatively low compared to others so it is crucial that you do your research if or when the time comes for you to look for a new home loan."
Westpac economists also predicted an August cash rate hike, while ANZ predicted a September cash rate rise.
Already the major banks have increased fixed home loan rates multiple times over the past few months, with the latest being NAB on Wednesday morning - rates are as much as 195 basis points higher than a year ago.
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