The Reserve Bank of Australia is widely expected to raise the official cash rate 25 basis points in August, new research has revealed.
According to the latest NAB Monthly Business Survey, the RBA will be forced to raise the cash rate come August in a bid to pre-empt any unanticipated cost pressures.
NAB’s chief economist Alan Oster said the Australian household and labour market will be significantly stronger by August, justifying a 0.25 per cent rate hike by the RBA.
“We have maintained our end point target cash rate at 5.25 per cent, to be reached in November 2011,” Mr Oster said.
“Any tendency for wage pressures to increase and become embedded in inflation expectations would see the RBA adopting a more aggressive monetary policy stance than we have assumed.”