The Reserve Bank is expected to raise rates for the fourth consecutive time when it meets tomorrow, amid evidence that the economic recovery is gaining momentum.
A slew of positive data over the past few weeks has all but set in stone a rate rise of 0.25 per cent.
Late last month, data from the Australian Bureau of Statistics showed the unemployment rate had dropped 0.1 per cent in December 2009 to 5.5 per cent, its lowest level since April 2009.
The positive unemployment result combined with a jump in consumer confidence has made a fourth consecutive rate rise very likely.
According to the Westpac-Melbourne Institute’s consumer sentiment index, consumer sentiment jumped 5.6 per cent in January to 120.1 and is now 33.6 per cent higher than a year ago.
AMP chief economist Shane Oliver said the Reserve Bank would not hesitate to raise the official cash rate to 4 per cent tomorrow.
“The justification will be a further improvement in the global economic outlook, a run of strong economic data in Australia for everything from employment to house prices and worse than may have been hoped for inflation figures for the December quarter,” Mr Oliver said.